Advice on Buying Adjacent Property

[Khalid Suliman]

I own a fully paid off mixed-use property which is leased out at market rate. Recently, the vacant property next door went up for sale.

It’s in an opportunity zone with favorable zoning. And I’d expect owning two adjacent lots would grant advantages or flexibility in development.

So I’m interested in buying with a plan to stabilize it in the short-term and build up in the long-term.

For financing - I’m exploring if I can use the equity in my property (next door) to help finance the purchase with favorable terms.

Anyone have experience with this? 
General thoughts?

[Henry Clark]

Financing:  Talk with your bank.

Tell them you want to Cross Collateralize between the two properties.  Ask them for a working line of credit put in place before you make and offer on the property, so financing is not an issue during the close process.  This makes your offer better to the seller.

They will want an appraisal on your property which might take a little bit (2 to 4 weeks depending on your market).  Let's say they will offer you a loan at 65% of your property value.  Does that come close to the value of the new property?  Estimate that before going down the path.  That will tell you if you need to kick in some cash.

It's always good to have adjoining property "in general".  But are both lots or buildings?  Both buildings, then do they jointly increase the value of both?  If the new one is an open lot, does it add value to any of the properties around you?