Sell as Potential Triplex, or Break up the Lots

[Randy Johnston]

My partner and I have a property in SE Portland that is in the final stages of development for a duplex.

We purchased the property with the intention of rehabbing the home on the front end of the lot and then partitioning two additional lots behind the home that will be accessed from a dead-end street and not requiring a flag lot. The City of Portland decided that they wanted three feet of our lot for a pedestrian pass-through so we had to re-evaluate and decided that we would only partition one additional lot developed for a duplex.

My question; what makes more sense . . . to sell the house separately from the lot, or should we market both lots to investors to allow them to build a duplex and keep the front home as well?  Our current rental income is $1695/mo and the duplex should bring the same for each unit. The lease renewal is approaching and I understand that the property is more attractive with a signed year-long lease.

My problem with selling the house separately is finding an owner who would not be bothered by having a two-story duplex that overlooks their backyard. 

Thanks for any feedback you have to offer.

Randy Johnston