Kansas City, MO · Member since 2018 · 21 posts · 5 votes
Hey everyone! Okay so I'm looking at a property that is listed as multifamily. But when I went to go see it, its actually 2 separate houses that are back to back on a street. One is a 2/1 the other a 1/1. My question is, if I buy them both, then want to sell just one of them later down the road, what would that look like in terms of the loan? For round numbers, let's say I paid 100K for the pair, then sold one for 60K. Could I even do that? Would the bank call the entire loan due if I sold one? Any and all thoughts/opinions/experience welcome :-) Thanks in advance guys!
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
7y
@Account Closed, few things to think about here.
You need to check with the town to see if these two properties can be legally "split." If they're on 1 lot, depending on local zoning, you may not be able to subdivide. You'll want to have a clear answer about if they can be divided and if so, what (and how much) it will take to do so.
Once you know this, then discuss with your bank. I have heard about loans where more than one property are on the note, it's written in how the selling of a single property is to be handled. Obviously, the bank can't continue to hold a note on a property that you no longer own.
Specialist · Denver, CO · Member since 2017 · 60 posts · 137 votes
7y
I was involved in a similar situation earlier this year, and had significant issues finding financing. In my case the smaller house was considered a carriage house, and thus couldn't be split, but also couldn't count toward the appraisal. The deal was great from a cash flow perspective, but I was looking for something with a bit more appreciation potential and passed. I would definitely second @Jaysen Medhurst, check out the zoning and verify the legality of the situation before proceeding.
You need to check with the town to see if these two properties can be legally "split." If they're on 1 lot, depending on local zoning, you may not be able to subdivide. You'll want to have a clear answer about if they can be divided and if so, what (and how much) it will take to do so.
Once you know this, then discuss with your bank. I have heard about loans where more than one property are on the note, it's written in how the selling of a single property is to be handled. Obviously, the bank can't continue to hold a note on a property that you no longer own.
This was great advice. I looked it up on the city's page and found everything I needed to know. Turns out that in KC, you CAN sell just one of them. But here's the catch, the lot size of the property has to be at least 10K sqft . Anything less than that mark may NOT be sold separately. This property doesn't meet the requirements. Which is fine because that plan was just an additional option. But at least i know now that I would have to cross that off the list of options. Thanks again!!