Looking for best use extra lot on single family House

[Mitchell Krotz]

Hello All,

I have been involved with real estate for about 1.5 yrs. I bought a house which I am currently "BRRR-ING" Trying to finish the work up on it by March. The house came with two separate lots, one with the house on it, the other is empty. When I finish the house and get it re-appraised I will be looking to do something with the property (sell, lease out, build something etc). The lot is a corner lot in the Hilliard, Columbus area. Has anyone had this type of situation? I am looking for any possible guidance (I am very new to the game) in terms of what I could potentially do with the property to help me get this real estate thing rolling quickly yet efficiently.

The lot is sized for a single family residence. 

[Scott Choppin]

@Mitchell Krotz

Hi Mitchell:

You have such a great opportunity here. There are a few opportunities here, depending on your risk tolerance, ability to execute on a new build scenario , what the land is zoned for, and if your present lender (if there is one, encumber both parcels):

Higher Risk/Zoned for SFH

• - Split the lot from existing building parcel, build a new SFH, and sell it, keep the cash or pay down your basis in existing unit.
• - Vice versa: sell the old unit, keep the new unit (easier/lower cost maintenance in rental scenario), keep the cash or pay down basis of new unit
• - Split the lot from existing, build a new SFH, and rent it, hold long term

Splitting the lot (or un-tieing it as some call it), gives ability to sell units separately if needed, or to finance them separately with different lenders/banks if that is a better situation. Maybe one has a regular mortgage, the other has a HELOC for discretionary capital to do other deals. You can always encumber both lots with one loan at your discretion.

Higher Risk/Zoned for MFH

All the same scenarios above, just that you may be able to build more units on the vacant lot

Lower Risk Tactics

• - Sell the land now as is, easiest, nothing to manage or build, just sell it. Will generate least amount of value. 
• - Sell the land later, possible appreciation, still no build needed
• - Sell the land now or later, with full set of architectural plans without permits, no build. Slight value add.
• - Sell the land now or later, with full set of architectural plans, processed through city plan check (called RTI "Ready to issue" permit status). Still no build, value added with RTI plan and permits. More value add as compared to first two items this list.
• - Use vacant parcel after untie, as collateral for new loans to do other deals, use the raw asset value. Wont' be able to get HELOC, as no lender will loan HELOC against raw land. Hard money lenders will be most likely for success, but will still need to search many, as raw land loans are always perceived as high risk by all lenders, commercial or private.

If this were my deal, I would maximize value by preparing plans, complete plan check/RTI process, and sell. Max value without need to build. We call this an "entitlement" deal, where you the developer do all the prep, plan check,/RTI ,but sell without building. Max value with no build scenario. As I have said in other posts, the most money we have ever made in real estate, was finding a great parcel of land, completing the zoning and planning process, preparing the maps/plats, then sell that package (land + approvals).

~ Scott