Turning a 5 acre Multifamily Zoned Lot into a Cash Cow

[Grant Boynton]

Hey all,

I am new to investing but have a big idea (for me at least). The kind of idea that gets my blood pumping and absolutely jacked. Anyway, here it is:

There is a house in the middle of my town (3bd 2ba) attached to 5 acres of land. The price is $1.1 Million (money I definitely do not have), but I do have about $100k. My plan is to split up this 5 acre parcel into 5 separate sections of a Family Transfer so that each one of my immediate family gets a piece and we don't have to go through regular laws of subdividing, which would be even more costly. Property taxes are only about $3,000/yr which is pretty average for where I live.

I would then build a 4plex on each of the 5 sections over the next 5 years using 3.5% down. Talk about an exhausting long term plan. This would add tremendous value to this plot of land overtime and add value to the community in terms of newer places for people to live, but like I said, I only have about $100k to work with.

I am just wondering if this would be possible, if I would need to find more money, or if anyone can give me any direction into what I need to do to educate myself in this area. I am trying to think creatively here because this is a primetime location, but any advice would be helpful.

Thanks everyone,

Grant B.

[Matt Devincenzo]

This opinion may be a little biased in that I work as a land use/site Civil Engineer. I think one of your first steps may be to try and talk to a local Civil or Surveyor.

Too often I see many clients who look at a development opportunity and don't have any real understanding of the issues surrounding actually developing. Even experienced developers can have this problem, in that they're only exposed to the sites they've developed in the past, where I've seen issues that have come up not only on their project, but also on other projects with their own unique site issues.

This often leads to overpaying (or almost overpaying) for the potential value of the property....sellers fuel this idea . Things like the density are important (4 units/ac), but what about minimum lot widths, frontage, setbacks, mitigation or environmental? Sometimes these can be overcome by not subdividing. 

I recently looked briefly at a parcel a newer developer was looking at that could support something like 20 units/ac for 34 total units, but he wanted to do townhouse/duplex style buildings on their own lots. So based on providing a common access driveway and minimum lot size he could actually only fit about 12-14 units/acre and 18 units...big difference. He'd be better served by building in the same configuration with the same building layouts but making them "condos". This makes it a single lot which would meet the frontage and setback requirements, but would allow him to also build up to the full 20 units/ac.

That triggers the next question what is the valuation difference between his fee simple townhouses/duplex and a "condo"? That's a question he'd have to research and run the numbers to see which comes out ahead.