Divide parcel with 2 houses and cash out refi or other options

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Divide parcel with 2 houses and cash out refi or other options

Janell E.
Rental Property Investor · Saginaw, MI · Member since 2019 · 34 posts · 25 votes
I bought 2 houses on a single parcel of 1 acre lot for $85,900 1 month ago. Rehab is finishing up and they're about to be ready for renting out at $850 and $1000. I put about $30,000 into rehab total. Estimated ARV for each house is $60,000 and $90,000. My plan is to divide the lot, which shouldn't be an issue based on my conversation with the township, and then cash out refi each property with conventional 30 year financing. I then should be able to pull out a total of about $112,000 minus about $3000 closing costs for each house giving me $106,000 leaving $10,000 left into the deal. Dividing the lot should allow be an easier exit strategy should I choose to sell one or both in the future (buyers can't get conventional financing on the property unless divided).

Just wondering if there are other options I'm not thinking of that would save me the time and small cost of dividing the property and also having to pay separate closing costs on each property. I appreciate the help. Thanks!
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Tanya H.
Investor · CO · Member since 2011 · 107 posts · 28 votes
5y

Hi Janell,

How fun to see you on here.  Here's some additional you might consider as well.  I don't know how/if it can be done, but if you could divide it into 3rd and sell the back of the property to the commercial property that is down on the next corner towards Euclid.  I think the property is going for sale soon, but at one time, the owners of that at the time was interested in buying some of the land out back there for more storage.  

I love that you are going to do the things that the property really needs - you have great vision.  I'd love to see the final rehab on the bigger house. 

Regards,

Tanya

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y
    Originally posted by @Janell E.:
    I bought 2 houses on a single parcel of 1 acre lot for $85,900 1 month ago. Rehab is finishing up and they're about to be ready for renting out at $850 and $1000. I put about $30,000 into rehab total. Estimated ARV for each house is $60,000 and $90,000. My plan is to divide the lot, which shouldn't be an issue based on my conversation with the township, and then cash out refi each property with conventional 30 year financing. I then should be able to pull out a total of about $112,000 minus about $3000 closing costs for each house giving me $106,000 leaving $10,000 left into the deal. Dividing the lot should allow be an easier exit strategy should I choose to sell one or both in the future (buyers can't get conventional financing on the property unless divided).

    Just wondering if there are other options I'm not thinking of that would save me the time and small cost of dividing the property and also having to pay separate closing costs on each property. I appreciate the help. Thanks!

    You could divide the lot and sell one of the properties, then just refinance the other property. I would sell the one that rents for $850. You don't want houses that rent under $1000 a month in your portfolio anyways. CAPEX is brutal on lower value properties like that. Closing costs are a killer on low value properties too. It could easily be 5% of the homes value to close the loan. Keep one, then get all that cash for the next deal.

    0Reply
  • Tanya H.
    Investor · CO · Member since 2011 · 107 posts · 28 votes
    5y

    Hi Janell,

    How fun to see you on here.  Here's some additional you might consider as well.  I don't know how/if it can be done, but if you could divide it into 3rd and sell the back of the property to the commercial property that is down on the next corner towards Euclid.  I think the property is going for sale soon, but at one time, the owners of that at the time was interested in buying some of the land out back there for more storage.  

    I love that you are going to do the things that the property really needs - you have great vision.  I'd love to see the final rehab on the bigger house. 

    Regards,

    Tanya

    1Reply
  • Janell E.
    OP
    Rental Property Investor · Saginaw, MI · Member since 2019 · 34 posts · 25 votes
    5y

    Thanks for the information Tanya! It was really fun to see the changes come along on the larger house. The hardwood floors under the carpet were an amazing surprise! So my current plan is to keep both houses on the same parcel. I found a non-traditional lender who is willing to lend at 6% with 75% LTV without a seasoning period. Hoping to get it rented out and refinanced soon so that I can move on to the next one! :) Here is a before and after of kitchen. Forgot to get a "before" pic of the bathroom, but here is the final product.

    0Reply
  • Tanya H.
    Investor · CO · Member since 2011 · 107 posts · 28 votes
    5y

    I love the pix!  It looks so much better!  Wow!!  Just beautiful!  And yes, those hardwood floors in the living room were covered up for a very long time (as long as I can remember).  Did you do anything upstairs?  I felt that had a lot of potential to not only update it, but to use the space better.  I just love everything you are doing.

    1Reply
  • Janell E.
    OP
    Rental Property Investor · Saginaw, MI · Member since 2019 · 34 posts · 25 votes
    5y

    I just realized I never replied to this! sorry about that. Thanks so much for the kind words. I did do some things upstairs.. added some new carpet all throughout the upstairs, had some insulation blown in, and the ceiling tiles painted as well as the stairway walls. I was able to get it rented out to a family that had lost part of their house to a fire and were going to be displaced for 6+ months, so they're currently there until June with their insurance paying the rent of $1200! More importantly, it really felt good to be able to provide a nice home for a family (they have 4 kids) and was able to get them in the week before Christmas.. perfect timing! Hope all is going well out in CO for you.. such a beautiful state.

    1Reply
  • Bruce C.
    Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    5y

    Hi there - the layout looks the same in the kitchen. Did you just paint the cabinets?  If so, how did you get them to look that nice after painting?  Or are those new doors and drawers (custom made of so?  Was that a better price than new cabinets)?  

    0Reply
  • Tanya H.
    Investor · CO · Member since 2011 · 107 posts · 28 votes
    5y

    That is great to hear that a family is getting to enjoy that house.  They're going to love that backyard too!  And that is an awesome rent!


    Glad to hear that the upstairs got spruced up too!  I'm thrilled that the place is doing so well for you! 

    0Reply
  • Janell E.
    OP
    Rental Property Investor · Saginaw, MI · Member since 2019 · 34 posts · 25 votes
    5y

    @Bruce C. I had my contractor paint them (inside and out) with a higher quality enamel cabinet paint after proper sanding and other prep. He also sprayed them, which I think makes them turn out better. They are the original doors and drawers - the wood was still in really good shape. I added new hardware to update the look and then after the picture was taken, I also added some door catches, so they would stay shut. I didn't check the price of new cabinets - these were in too good of shape to even think about that.

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