6 houses on 1 lot - is this normal and can I separate them?

Question

I came across a really great wholesale deal in the Bessemer / Lipscomb area of Birmingham.

However, on the surface - at least to me - the way the land and public records are coming up in my research have me a little confused /concerned if this deal can actually go through.

Here are the details:

• I am getting a package of 6 houses and 1 empty lot under contract from the seller
• He rents out 5 of the houses to tenants but is letting his brother live in the 6th house for free (he promised his deceased mother he would take care of his brother)Each of the different homes have their own addresses
• Each of the different homes have their own addresses
• When looking in the public records all of the houses are on the same Parcel / Tax ID #
• The seller wants to try to keep the house that his brother lives in out of the deal so his brother has a place to live and is taken care
• The seller lives out of town in southern Alabama and owes at least 2 years of back taxes

• Each of the different homes have their own addresses

So my questions are:

• Is it normal / legal to have more than 1 home on a single parcel?
• Will there be any way to separate the 6th house his brother is living in or should we put in the contract that for the next X years he can live there rent free but will have to pay Y for taxes?

I look forward to the advice!

Jay DeCima · Answer

Joe

Here are my answers.  At my high point I had 250+ homes for rental in Northern Calif.  All were groups of homes on a single parcel.  Almost all had seller financing because a bank will not finance 5 or more homes, THAT NEED WORK, on a single lot.

1:This is my specialty.  Buying groups of houses on a single lot.

2: You can make any kind of deal you want on the 6th house.  YOU CREATE THE GOOD DEAL. Probably not worth the effort to split the parcel.

Jeff B. · Answer

To keep 1/n and sell the n-1 to another party, you will need to subdivide and create a new APN for the one not party  to the transaction.  This can be difficult due to zoning restrictions, access to the isolated house over the land being sold.

First, get the seller to do the leg work as noted.  Create a letter of intent to purchase the five remaining.  If this subdivision attempt dies, the the whole deal is D.O.A and you've lost nothing.

Anastasia Jordan · Answer

When I think of 6 houses on 1 lot in Bessemer I think of a row of shotgun houses.  What condition are these homes in?

Rick H. · Answer

I 2nd Jay's thoughts.

On the acquisition side it's a tough to sell property due to restricted commercial financing choices (maybe only HM). That keave cash or seller financing.

Seller financing is where it gets interesting, I think that @Jay DeCima may have voted for Jimmy Carter in 1976 but for self-serving reasons (because of all the seller financing opportunities the tight money and high interests rates caused), Jay, I suffered just so you could get rich :-) on soggy paper!

When you work the seller financing angle, engineer deal structure with the intention of the seller coming back to the well later. I'd also plan on having flexibility to release some properties but not others from a blanket mortgage. There's a long list of things you could do now.

If you haven't studied Jay's training material, you ought to do so.

Bill Gulley · Answer

It's common for an owner of several adjoining properties to have an abbreviated legal under one tax bill, the collector doesn't send out multiple bills!

Check on the legal form the deed of conveyance, then see if any other new legals were filed.

If all are under the same legal, you should do a minor subdivision, not hard to get done in these cases as each property will become more marketable, expect the tax base to go up slightly. Do so as Brian suggested.

A good legal description is the first thing needed to improve the market value, ease of transferring title is essential to a property value, look up "DIRT in real estate value".   :)

Jeff B. · Answer

IMO, the complexity will kill any savvy investor from closing - - I would not due to the 6th home in question.  The subdivision and the life-long lease are equally difficult.

Joe Garbarczyk · Answer

Thanks @Brian Truman and @Jeff B.

If I were to re-word my question it would be: SHOULD I separate the 6th house, not CAN I separate the 6th house?

@Jeff - The seller is an older gentleman who has some health issues so it's highly unlikely he will do any leg work - nor would I want him to since this would delay the closing.

@Brian - Financing is NOT an issue at all. This is a class C neighborhood on a good day. It's a really good deal. Also, I don't believe there's anything clouding the title - only some back taxes that are owed.

@Jay DeCima What I'm going to do is work out an agreement with the seller on the 6th house so it's included in the deal but the brother can live there as long as he pays something monthly that goes towards taxes and not necessarily rent. I know I am going to have another conversation with the seller about this.

PS - Did I mention I'm going to wholesale this deal?

Brian Truman · Answer

Hi @Joe Garbarczyk,

Wow! What a unique property! So...I hope you don't mind me asking a few qualifying questions...:

• What is the zoning? If there are not separate tax parcels, that sounds like multi-family. If its not zoned for that, or its non-conforming, then you might have some problems getting financing on the property. Or, that might be a title issue that could hamper the closing. 
• What does the legal description say? Are there underlying legal lots that you could use as a historical basis for being able to carve off the lots? I would see what the minimum lot size requirements, if any are there and see if you are able to subdivide the houses off and get them their own tax parcels. Where I am at in the Northwest, this is really expensive to do. 
• Have you checked to see if there were any zoning violations on the property?
• Lastly, have you pulled title to see if all these properties are on the title report, and clouds, if any.

I would recommend going down to the jurisdiction the property is located in and talking with the planning and development or permitting departments to see what they would ding you on.

I hope that helps, Joe! Happy hunting! Cheers!

Brian Truman

Joe Garbarczyk · Answer

Thank you, @Jay DeCima.

6 houses on 1 lot - is this normal and can I separate them?

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