I've recently bought my first deal, which is 2 SFH on one lot. I wanted to use the BRRRR strategy, but I ended up getting a loan for 80% of the ARV. So the potential value add was already built into the loan. The appraiser had to value the properties low due to them not being zoned multi-family; he instead appraised them as 1 SFH with a "functional defect". He said the best way to raise the value would be to subdivide, then he could appraise them as 2 SFH, rather that one large home with a defect. My other option of course is to have the property rezoned, but I'd hate to run the risk. My goal is to pull out the cash I have int the property to reinvest, but with the low appraisal, that's not going to happen. I'd like to know if this sounds like a good way to get more value out of the property, and whether the hassle would be worth it...thoughts?
More details: The front house was built in 1920s appx 1100sf; the back house was built onto gradually through probably the 70s, and is now 1700sf. They are very nice houses in a great location. One house is now rented, and the other should be soon. Together, they will cash flow very well. The houses don't share a wall or roof, but the roofs are only 3-4 inches apart; I had to get separate insurance and home warranties for each house. All separate meters except water, which will be taken care of shortly. No restrictive covenants preventing subdivision, and nothing in my deed of trust prohibiting subdivision. The surveyor should be able to take care of anything with the city, or let me know if the city simply won't approve. I'm wondering how much value add this could provide, any unforeseen disadvantages, and any unforeseen perks. Let me know what you think!
