A Real Estate Investment Opportunity

Homes with extra lot can be a real estate investment opportunity. They may provide a way to reduce the cost of a rental home you will buy, or just a way to make a profit buying and selling. Of course it may be difficult if you do not know the rules. 

Typically, when a town was platted in the past, the residents went to build a home on each lot. Of course, there are some built on two lots. This is why, even in regular home will often be the house or two that have a larger yard than the rest. If these houses with their garages and other out-buildings sit properly on one of the two parties - i.e. they are placed far enough from the lot line to comply with city regulations - the extra lot can be sold. 

Normally, even if the property has been assembled in one tax authority parcel, you can share out of the other parties get a new tax number to it and sell it. Why is this significant? Because the value of your home on a lot plus the value of the other lots sold separately is often much higher in total than the house, will initially cost to both parties. 

We first heard about this idea from a real estate agent who had done this in a small town in northern Michigan. He had noticed that many homes in one area had two parties, but the houses sat entirely at one of them. The lots in this area can be sold for $ 45,000, yet home with extra lots just sold for about $ 20,000 more. People will only pay as much extra for what seems to be just one big farm. 

The obvious plan for an investor to buy homes, selling the lot and then sell the home which is what he did. Obviously a large chunk of this potential $ 25,000 profit was eaten up by transaction and holding costs. Ideally, then, you want to combine this strategy with a low offer so you get the home for a little below market. 

There is another way to use this strategy. If you were looking for a rental home as an investment, and home with extra lots are also under-appreciated in your area, take a look! You can pay $ 20,000 more, but if you sell the lot for $ 45,000 and has only $ 5,000 in costs associated with doing what you net $ 20,000. 

This can be difficult if you have financed deal, but the bank may allow you to sell much if the proceeds used for mortgages. In this case you cut your costs to rent homes from $ 20,000 in relation to other dwellings. Refinance and it may be enough to reverse a negative cash flow rental in a positive direction. 

Apart from being a real estate investment opportunity, you can do this when you buy your own home too. If you really do not want to mow a large lawn, buy a house with an extra large and sell that lot. If you can get the seller to agree to sell it as two pieces of real estate, you can pay cash for the lot and then be free to sell it without getting approval from your lender.