Lately, I've started thinking maybe these people are wholesalers or investors that could have properties to sell.

If your going to all the expense of entitling this land, you might as well do it as a developer would, Since that is who you will be selling it to.

If it is deeded separately, maybe you can fix that, sell it and then use those proceeds to pay off something to owner #1. 

I am going to closing to sell my house next week and the buyers closing lawyer informed me their is a partial HUD mortgage on my home in the amount of $35,000 which is way more than I owed when I did my loan modification.

You are also selling your own investment ("should support stable tenant demand"), but what is that based on? 

To do that, I was intending to sell some stock (75k to completely pay of home 1). 

I bought it way too high in 2005 so no point in selling anytime soon.  

I have been an investor for well over a decade and working with other investors buying and selling flips and rentals for nearly as long here in the Dallas/Ft.

Quote from @Kyle Gardner: Ill probably keep 3-4 and sell the rest.

For some context I have completed 3 BRRR's and brokered dozens of deals to investors both on the buy and sell side.