Mixed strategy: Seeking thoughts. (Develop 2 acres?)

[Justin Vincent]

Background info:
I currently own a duplex. First property, just out of college. Going strictly Owner occupied route and maintaining a desk job for the next couple of years at least. I force appreciation through renovation in spare time and on weekends. I can do all work, but I don't mess with the main plumbing in/out, main electrical in/out, and structural issues.

Unique owner occupied opportunity:
I am looking at a property that is listed at $145k in an area where updated comps are getting $250k. It needs serious updating, but the internals seem ok. (Purely speculative at this point.) It is also on 2 acres in a suburban area where lot sizes are typically 1/4 to 1/2 acre.

My approach to this property would be to renovate and then re-fi to pull out equity. Create two more homes on the acre of residual land (according to city records its .88 acres. The driveway is shared with another home and the owner would have to approve additional sharing of drive.)

Has anyone tried this approach of owner occupied renovation that grows into new construction? What are some things I should look into if I decide to pursue this approach? Is 5 years too aggresive for a part time investor to manage two new builds and a reno? (The new builds would almost all be entirely self-managed but contracted out?)

My exit strategy would be to only update the house, make it my residence for a number of years, then eventually list and sell if necessary. I could then invest in other buy and hold properties instead of pursuing new construction. Its an area I would be interested in living in, with land!

Thanks for the thoughts,
JV

[Bill Gulley]

You'll need to do a minor subdivision to split a lot. If those are the common lot sizes they may not approve that. If there is a septic tank, you may not have enough land to build another home. If you get a loan to buy it initially, the entire platted lot will be taken as collateral, you'd have to survey the excess land off and refinance the duplex on a smaller lot to free it of any encumbrance, or survey off the excess and only finance the purchase on a smaller lot if the seller can do the subdivision for a new legal description. You'll likely have issues with a shared drive if you have zoning restrictions, like no more than 2 properties on a shared driveway, a third or forth could also kick off requirements for a street, curb and gutters.

You better get with the planing and zoning folks before you buy (or make an offer) to see if such a plan is feasible, I don't think with .88 and a shared drive you have a very good chance, but it might work. Don't assume anything, I'd bet the neighbor wouldn't be crazy about the increased concentration and traffic on the driveway. BTW, check to see if there is an existing driveway agreement filed in the land records and that it addresses maintenance.

This is not an easy thing to accomplish. IMO :)