Creative uses of a fairly big lot in 78757

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Creative uses of a fairly big lot in 78757

Joshua Merritt
Austin, TX · Member since 2017 · 2 posts · 0 votes

This is a long shot, but posting to see if any of you real estate pros have any creative ideas for me. 

My wife and I bought in Wooten (basically Anderson Ln. and Burnet Rd. area, in 78757) in 2010, which turned out to be a good time to buy. We love the location, but not really the home. We have way more land than we want or need — it's a 13,262 sq. ft. corner lot that is bigger than the two lots across the street combined. Way too much yard maintenance for a busy family of 5. 

In a perfect world, I'd love to be able to subdivide the lot, build another unit on it, then sell that unit and use the profits to pay off the mortgage on the main home. Then, we'd either borrow the $$ to do a MAJOR renovation or tear it down and build something brand new for ourselves. We'd honestly be perfectly happy turning the entire lot into 2 or 3 townhomes, or a connected duplex or something, and living in one of the units ourselves and selling the other(s). 

But I recognize that is backwards. The bank that holds our mortgage isn't going to let us subdivide, develop, and sell part of the property we currently owe them money on. But we don't have the $$ to pay off the mortgage in advance. It's a small mortgage by central Austin standards — we basically just owe around what the city values the land alone at these days — but we don't have the cash to pay that off. 

Am I looking at this wrong? Am I just crazy? (It's okay to say that I am.) Are there ways to raise the money you need to pay off a mortgage and then subdivide / build several units on your land, with the intention of selling the other units and keeping one for yourself?

How do you go about exploring / financing such an opportunity? Is this the type of project a homeowner can take on with a bank, or are there small investors who can get involved and work out a mutually amicable deal?

Just curious what your thoughts are. I'm sure there isn't much I can do, but wanted to put it to this crowd first. I figure if anyone knows how to make something like this happen (or deem it impossible for once and for all) it would be this crowd. 

Thanks so much for your thoughts. 

-Joshua

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  • Benjimen Elliott Johnston
    Eufaula, AL · Member since 2016 · 14 posts · 2 votes
    9y
    I'm not sure if this will work, but I recently looked into this for a piece of commercial property. Talk to the bank first. If they will allow and you have the money for a survey, Have the lot surveyed into sections and if the bank will release the portion not containing your existing home. Refinance your home and use equity to build on other lot portions. Check with building codes first to make sure you can build.
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  • Jason Hirko
    Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    @Joshua Merritt the problem that I have seen a lot of folks run into in this type of situation is that while the bank (if it's a local bank, usually) will allow you to do what @Benjimen Elliott Johnston suggests and have the land resurveyed, but then the value that they put on the two subsequent lots might not jive with what you are trying to do. I have a client who is in the middle of doing what you're suggesting. They bought a small old house on a huge double lot for $350,000. They built their new house next door for $500,000, and then subdivided the lots. However, when they asked what the new payoff amount was for the original purchase, now that they had taken more than half of the land away. The bank said parcel one was $350,000 and parcel two was $500,000. They obviously disagreed, but the bank wouldn't budge. They ended up selling the small house for $250,000 and refinancing the new house for $600,000 to make sure everything was released from the lien. Best bet is to talk through your whole plan with the current lien holder. If they don't want to play ball, your best bet may be to refinance the whole thing now with someone who will.

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  • Jarrod Weaver
    Broker/Investor · Georgetown, TX · Member since 2011 · 249 posts · 146 votes
    9y

    Check your deed restrictions. Is subdivision even an option? In most neighborhoods it is not.

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  • Account Closed
    Johnson City, TN · Member since 2014 · 586 posts · 705 votes
    9y

    I have to laugh that less than a third of an acre is considered big in Texas. Most people would be hard pressed to turn their truck around on that size lol.

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  • Joshua Merritt
    OP
    Austin, TX · Member since 2017 · 2 posts · 0 votes
    9y
    Originally posted by @Account Closed:

    I have to laugh that less than a third of an acre is considered big in Texas. Most people would be hard pressed to turn their truck around on that size lol.

     It's not considered a big lot in Texas. . . . just in central Austin, where builders are now tearing down homes on lots like this and building 2 or 3 "tall, skinny townhomes." It's all about location. 

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  • Jon Mayronne
    Real Estate Agent · Austin, TX · Member since 2017 · 2 posts · 0 votes
    9y

    The tricky part is going to be the valuation of the undeveloped property IF subdividing your lot is even feasible but I think you will more than likely find it will be cost prohibitive altogether.  You can bet the city will be ready with a property tax appraisal as high as everything else is in Austin.  You'll have survey costs, possibly high costs for access to road, sewer, and utilities for the new lot.  Best thing to to do is call the city to find out the details of what you're proposing.  That might stop you dead in you tracks.  But if it's feasible, then start looking for small investors or creative ways to pay off your current mortgage and start developing the new lot.  Best of luck either way!

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  • Jared Watson
    Investor · Austin, TX · Member since 2015 · 222 posts · 58 votes
    9y
    Originally posted by @Joshua Merritt:
    Originally posted by @Account Closed:

    I have to laugh that less than a third of an acre is considered big in Texas. Most people would be hard pressed to turn their truck around on that size lol.

     It's not considered a big lot in Texas. . . . just in central Austin, where builders are now tearing down homes on lots like this and building 2 or 3 "tall, skinny townhomes." It's all about location. 

     It's a perfect size lot for a duplex in central Austin

    Should be a home run👍

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  • Aaron Gordy
    Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
    9y

    @Joshua Merritt Duplex or condo? I would think that two condos would be more valuable than one duplex. Looking at the numbers for that area, it seems reasonable to come to that conclusion. Have you thought about getting it rezoned to SF-5 or SF-6? Or maybe something else? https://www.austintexas.gov/sites/default/files/fi...

    If I were you I would consider getting with some professionals and see about the highest and best use for that property. There a ton of ways to make deals work, imo.

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