Lot severance to build a Multi Family

4 Replies

Hello,

I just purchased my first income property as part of what should become a larger development project. I have a lot of options and I could use some advice on what may be the most practical.

Back story: My mother and her husband purchased a duplex in Woodstock Ontario in 2014. It is on a corner lot just a minute walk from down town with a very deep back yard (182 feet). When they first bought it, we looked at the yard and thought to ourselves that this property alone is big enough the sever the backyard and have a new lot facing the adjacent street. We spoke to the city and although the lot is more than big enough from side to side to fit a house its not deep enough from the front of the adjacent street to meet the rear yard setback in the zoning by-law. They also mentioned that if we were able to get some land from the house next door to their duplex we would definitely have enough room.

Earlier this month house next door went for sale and I just bought it. I close at the end of this month. The house will carry itself if not even cashflow a bit. I had a discussion over the phone with the city planner before buying the property and received lots of positive feedback in support of severing a lot and adding density to the downtown region. Now I should also mention that for a living I am a civil engineering technologist and make site plan, servicing and all types of engineering drawings for a living. When I spoke with the planner I sent along a very clear and to scale drawing of exactly what it is I have in mind and showed that it meets all zoning requirements and setbacks.

The city has previously allowed all sorts of multi-family infill to be built in the immediate area. The lot I would be able to sever would be large, upwards of 7700sq ft. It is currently zoned R2 which would allow for single family, semis or a duplex. It abuts a zone that allows for quadplexs and small apartment buildings.

Some options I see are: severing the lot and selling it to someone else, putting up a duplex or semis, or going for a zoning change and try to get a quadplex or larger built on my new lot. The city is supporting all types of infill projects in this area so I don’t think it would be a stretch to get the rezoning and getting a quadplex or more built. The property also has a significant elevation change. Earth moving and a possible retaining wall may be necessary.

Some questions I have:

  • Should I be working with a lawyer on this project? I found a good one that does this for a living both in his personal and business life. I also have some skills due to my line of work that may make it unnecessary.
  • Is building a brand new quadplex a feasible investment for significant cash flow? I’m also trying to get a feel for how much It would cost to put up a basic Quadplex.
  • Would it make more sense just to sever the lot and sell it at a profit being as it would be a large lot right near downtown?

Any thoughts or advice anyone would have for a project like this would be greatly appreciated.

Thanks in advance!

Hi Jonathan, I was able sever 2 lots off of the properties mentioned above. Currently fulfilling conditions and extremely close to having deeds in hand. Still deciding whether to build myself or flip the lots to a builder. Will depend on if the city will allow us to build 2 duplexes or not. If yes, I will build and hold. If no I will sell the lots. I actually bought another similar project in the meantime and was just granted a severance on that one as well. Also got to demolish a house on this new one which was a first.

Hi Dan,

Your background will serve you very well here, glad you're hopping into your first deal with a solid foundation.

To answer your questions:

1.) This is a very area-specific question. In CA, you could more than likely float with calling a commercial agent and having them guide you through severing the land (if possible) and dealing with selling the property. They're free up until you sign a Commercial listing agreement contract, so that's always great. Just please be respectful of their time. However, if that doesn't work in Ontario, consulting with a lawyer and paying a fee for peace of mind will be the best large sum of money you've ever spent. Sleeping with a million questions running through your head is near impossible.

2.) Your question pertains to what's known as a "Replacement Cost", or, would it make more sense for me to purchase a brand new Class-A building, or build one myself? You'll need to do an extensive investigation to get your answer. Find out the all-in cost to purchase the land and build a quadplex, factor in time, and compare that to just purchasing a new building with the same sum of money.

3.) As Mark Twain once said, "Buy land, they're not making it anymore." Your choice on what you decide to do. Sever, hold, build, sell. All are equally justifiable options. 

Good luck!