Combining lots/RH Development in Portland

[Mathew Wray]

Hey Portland friends, 

I think I know the answer to my question, but I want to double check with those with more development experience. I've got friends who have a tear-down house next door to them that is about to go up for sale. Theirs is a really well updated 3/1 in a good, close-in neighborhood. Both properties are zoned RH and could combine to create about a 9,600 square foot lot. If I'm reading the rules correctly, under 10,000 square feet, RH lots are limited to 1 unit/2,000 with maximum building coverage of 85%. That leaves 4 units potential IF the lots were combined. 

What they're wondering is if they could sell their lot to the same developer who buys the tear-down, allowing the developer to get extra value by increasing the lot size. Their main motivation is worry about being sandwiched in by towering new home construction. 

A couple thoughts:

1. I know it "could" be done, but I have my doubts about the practicality of it-has anyone done this recently?

2. I know lots of people are not doing developments in Portland because of the difficulty in dealing with the city. As I explained to them, between acquisition costs (their home alone is worth 500K on the market, not including the lot next door), permits, fees, holding costs, the cost of tearing down their perfectly good home, and then adding in the cost to build 4 new units it just doesn't seem like it would pencil out. Am I missing anything in my advice to them? 

3. Seems like if they're worried, it would just be easier to wait until the tear-down is torn-down and sell once the blighted house is no longer hurting their property value and take the equity somewhere else. 

Thoughts? 

Thanks and happy Spring!!