Father in law has 1.66 acres zoned R-18 which allows 12-18 units per acre. It is in a central location in town and properties to west and south have recently been developed.

The current house is in rough shape and will not finance. He thinks it is livable for him but realistically a tear down or a HEAVY investment to get it back into Shape and some of the items need to be done within the next year (like roof). 

Ideally, I would like to buy the property and just replace the house OR tear it down and build a new house on lot without sacrificing future development plans. That way he can Continue to live on the same land he was raised in a house that is habitable. After he passes or decides to leave, we would have options to Develop, live, rent, etc. Is it possible to build only 1 or 2 houses when it is zoned this way?

We have the money to pay it off now, but sinking several hundred thousand dollars cash into this property now unless we can generate income on it does not work with our current plan.

I Am open to other thoughts and ideas for this property but the key pieces are: 

We want to keep the land and not sell at this time and I know it will only increase in value

He wants to continue to live there

We have money but would want to generate income right away if we invest much. 

We are trying to figure it out and take action while we have time vs. an event that causes us to have to make a decision. Thank you for any input you have!