I have an offer on a multi family duplex that's been accepted. I just found out that the property is shared by two lots. So there's a total of houses involved. House 1 - 2 bedroom, House 2 duplex, House 3 3 bedrooms.
The owner of the lot is the same guy that's selling me the duplex. The likely options are a package deal for all three properties.
- Have you dealt with this?
- What invoved with splitting the lots? Costs - I'd like to quantify his headache which may make him more motivated.
- What type of headache will I be inherting?
- This seems like this strenghtens my neogation strength?
To answer your questions in order:
1) - I've not dealt with this as a REI but I do in my profession all the time (I'm in architecture).
2) - Splitting lots can be time consuming and expensive (relative to your budget that is). You will have to check with your local city code as to what you can do and I would do this before you buy. It really depends on your city codes. Depending on the zoning location you could be just fine or completely screwed. As in they will make you tare down one of the buildings screwed. Not trying to scare you as is an extreme but it is a possibility, though probably unlikely. Zoning almost always will have a minimum lot size. So you might not even be able to split it because you can't make a lot big enough.
As for price, again, this is determined by the city. You'll have to call them and ask for a price. My city costs would be a couple grand.
3) - Your headache level depends on the codes and zoning. It could be a breeze or a massive PITA.
4) - I hate to keep saying this but this depends on your codes lol. If the building were built against code then you can have some leverage as it could be difficult to sell in the future if you back out. If the code says all is good then you might still have some but not that much. If they are determined to sell then you might have something but if not....well...you can always try.
Thanks. I'll call the city to see what they say. This deal has gotten more interesting by the day
Appreciate the feedback
@Nik Moushon I talked to the city and looks like they mentioned that the lots are grandfathered in as
- Single Family
- Single Family
To rezone the lots would cause issues that with the multifamily retaining its status.
My exit scenario I purchase the group of 3 would be to sell it to as a group to another buyer.
I'm trying to think of what type of discount should I ask for from the seller considering the above.
We were looking at buying a similar scenario about a year ago! The bank said if you could get the lots split and they were each their own it’s a heck of a deal but splitting them takes a lot of time and money and code following. Not worth it is what we found to big of a headache.
Also all the banks that we called around to since we wanted to refinance back out after we fixed it up some. They said they’d have to have a meeting and vote if they would do it or not so that end of the deal is sketchy as well.
@Rema W. Grandfathering situations are great if you keep it the same but as soon as you start changing things it usually causes more trouble (and money) than its worth. One way to get around what the city has said is converting that duplex into a SFH, if thats possible.
You could also dig deeper into the code to see if theres some work around but thats not guaranteed. The city more than likely isnt lying to you but they dont always give you all the information or all your options. Most the time they just don't know the code very well as most people just look up in one spot in the code on the computer. You cant blame them for that the code can be very large and unless they've been there for 30+ years they dont have much of it memorized or at least to a point of knowing where else to check.
I ended going forward with the deal. The seller packaged all three of the properties into a decent cash flowing deal.
My exit will be to eventually sell the properties to another investor, at discount but by then I'll have earned my return.
Thanks for feedback
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