Posted by Cathlin on January 06, 2003 at 23:32:31:
Zack,
In answer to why it might be harder to finance two houses on one lot:
I recently attempted to purchase a house and duplex on one tax lot. The appraiser found that the current zoning did not allow such an arrangement. The lot was too small for the number of units.
I ran into problems getting financing, as you mentioned in your post. The problem my lender had with the property was that, if one of the structures were to burn, it could not be rebuilt on the lot, given current zoning. The insurance company was happy to cover it, and explained to me that if they had to rebuild one of the units, I would need to buy a lot and they’d build the replacement on the new lot. Because of this, the property would not qualify for a conforming loan. I then went to a portfolio lender (a bank or other lender that keeps its notes rather than selling them, so they can be more flexible in their lending criteria) and they were fine with the property, knowing about the zoning. This is just one scenario that might lead to financing difficulties.
Posted by Isaac W on January 06, 2003 at 16:33:36:
I found a deal I think could be profitable. Two homes one lot selling for 65,000. One home is currently rented for 400 per month. The other is vacant but assumably could rent for 525. Owner owns the property outright and is willing to create a mortgage 10% int for 30 years which would be 625 per month. For that to happen however he wants 6500 down on the property. He said the homes could each sell for approximately 50k for one and 60k for the other if they were sub divided. I’ve never actually made a deal yet. Any tips or advice would be great.
Sounds like a good deal, but I would find out what the properties are really worth(could be worth more or less but don’t count on the seller’s estimate of value). Then check with the county/city and make sure they will allow you to subdivide the lot, and check the newspaper or better yet talk to a property manager and make sure you can get the rent you need for the vacant house. I guess if you don’t have any plan of selling soon it would still not be a bad deal even if you can’t divide the lot, but I have heard that it is harder to get a loan on a piece of property with two houses on it, I don’t know if this is true or not, if so I don’t know why it really doesn’t make any sense to me. If that is the case it may make it harder to find a buyer who can get financed.
Sounds pretty good to me. Should be break even cash flow which is better than you usually do on SFH’s.
Nothing down isn’t the prize, making money is the prize. If it really is a good deal don’t let the down payment stop you.
Go down to the courthouse and check the deed(s). It is possible the property is already divided and the houses are on separate lots even though the owner says different. Don’t laugh, I have seen this situation more than once.