Buy house, land or both from this motivated seller...?

[Diallo Murphy]

Hey BP Family,

I got a call from what sounds like an investor.  He has a rental home on .67 acres in the Hayward, CA hills.  He is in the process of subdividing the land into 5 parcels.  He has a survey but has not submitted for the tract map yet (cost $15,000 and then has to get approved by the city). 

He wants to sell the lot parcels individually at $±200k each with avg lot size 5000sf. Or all 5 parcels including the one with the existing rental home for $1.6M.  Comps in the area are around $720-$850k for a sfh about same size as the rental home.  The rental home is 1600sf on a corner lot 5600sf in size.  

I drove by the site and noticed its on a steep slope, in order for him to build on 2 of the parcels will require massive retaining walls. They are down the hill.  

He does not want to sell the home by itself (wish he did).

New construction costs about $250-$300 per sf and sells for about $400-$600 to build in this area.

I really would love to hear some ideas about how to structure this deal, if there is one...? I wanted to wholesale the home, but the seller loves the rental income.

Any suggestions?