Flip of rural REO on 2.8 acres with two existing homes with private lender

[Rachael Collins]

I am putting together my first deal after only three months of deciding to become a RE investor. I really need advice and input in every aspect of this deal as I have very little experience.

Here it is:

A 2.83 acre parcel zoned E 2 1/2 R MH. It has two MH on it now, one at 2,400 SF that we plan to rehab, and one at 1,200 SF that needs to be demo'd and replaced. This property is rural, but only 45 min from large cities in two directions. We have a private lender in place if the numbers work. We want to do one of two things:

1. Apply for a Zone Modification to split the lot and sell them separately after rehab of larger home and placement of  a new MH on second lot.

2. Apply for a Conditional Use Permit to increase the allowable size of the secondary residence and sell the entire property with two homes on it.

Both options require approximately the same amount of time and money to change entitlement, barring any neighboring resident opposition.

I believe the first option would be more lucrative, however, the Zone Change is a 50/50 chance. They are not always approved, and that could possibly take up three months. I am not sure if it would be a waste of time and money on my first deal. Particularly as I have no experience in changing entitlement on property. The CUP has a much more likely chance of approval (I spoke to the County Planners and they have indicated that those types of applications are not very controversial and have been generally approved).

Is there anything I need to know about REO properties in this situation that may hinder my deal?

I am also wondering about the process for using a private lender. The lender we have lined up is a business associate of my husbands and knows we are honest, responsible, that we have construction experience, but that we are new at this. He is a general contractor and does flips and builds spec homes himself. He has simply said he will lend if we present a good deal, but has not given specifics about his expectations. I want to make sure we both go in and come out getting what we expect and deserve from this transaction, and want to make sure we approach him as professionally as possible as new investors. Any help with this is appreciated.

In light of all of the information I have provided, please let me know any potemtial issues you may see, questions I need to ask, or advice you can give.

Thank you,

Rachael