Well not quite sure I'm putting this in the right place. Please advise:
Working on a deal that is a potential rehab and hold. Family home on a 4000 square foot lot that is only 40 feet deep. The house is sitting very close to the lot line. The seller seems to think the lot line goes through the house. Im not sold on that but its close. Seller owns the lot behind that is 75 feet deep and 100 wide for 7500 square feet. Just to complicate the issue the area just past the lot line has a steep slope of about 20 foot vertical drop. Upper and lower areas are very flat. While the county has the area as a potential slide area my professional experience in the area says the slope is very stable and not a concern. Just to complicate the picture the lot behind the home is almot completely covered in Oregon White Oak which is a "locally important habitat" and is mapped as such by the state DNR. Development of either lot would require a geotechnical report with soil pits and a slope stability analysis for about $10000 to $15000. Development of the vacant lot would require a biological assesment at an unknown cost and unknown outcome. Seller is not interested in a lot line adjustment and would simply like some compensation for the vacant lot (my agent thinks $5000 would do the trick just to make them feel better). Home is below replacement cost (barely) and smack in my target area. Unless property values doubble the vacant lot is not a good development target (and perhaps even then). Its basically a maintence and tax liability. It will cost me $400 to $800 a year in taxes. It does boost the value at resale of the home as the trees and view in the winter is better than looking at a house. Hard to quantify what the value add is..... perhaps 10k to 20k.
Some ideas i have are:
Grab the lot and:
Sit on it. If the market goes up enough it might be worth adjusting the lots and spec building.
Adjust the lot line then donate the land to the county parks department as an open space restricted area. Or find some other charity to donate it too. That will save me 400-800 a year....
Just recombine the lots as the lands best economic use right now seems to be as a backyard.
Some other option:
negotiate a lot line adjustment prior to close and only buy the house.
@Eric B. Seems to me the only value of the lot will be as a backyard. I highly doubt if there's some type of protected trees on the lot that you will be able to ever develop it. On the other hand, if you can pick it up cheap enough and use it as a backyard, and someday miracles happen and politicians quit their idol worship, you would have it and be able to develop. It should add value to the house though, because right now, 40' depth would be tough to do anything with. Can you remodel that house, add more square footage, and have a nice house on a huge lot? If so, that's what I think I'd do.
P.S. I did move this to a different forum where I think you'll get more answers. The Deal Diaries is more for ongoing projects to get everyone up to date.
I think the value of the extra land depends on a lot of things, many of them local.
Coming from the opportunity for a new build, here are some thoughts that likely don't apply to you, but may shake something else loose.
Does changing the size of the lot change the 'best and highest' use scenario? For example, if it were in Austin, the value would be that the extra square feet that we could build on the lot. We can only build 40% of a lot under normal circumstances, so theoretically, increasing a 4000 sq. ft. lot to a 11,500 sq ft lot is the difference between a potential for a1600 sq. ft, single family, new build to a 4600 sq. ft duplex, that sell off as 2 separate condos.
Another thing that will likely change are the rear setbacks on your property. This might change how big you could go, or how you put a house on the lot, etc.
As far as a decision to buy/hold and pay the taxes, I'd look at the historical appreciation and growth in the area, really try to understand what could be done on the lot, and try to make an educated guess from there.
Let us know what you end up deciding!
Join the Largest Real Estate Investing Community
Basic membership is free, forever.