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One Big House not Two Small Ones
June 11, 2012 9:42 PM   Subscribe

The house next door to mine is on sale. If I could sell both houses I would double my money. What should I do?

I live next to a nice pond in a wealthy residential area. The owner of the house next door died and now, six months later, a realtor is trying to sell her home and land. Both her house and my house are old ones --- teardowns --- in an area where a LOT of new-home construction is happening. I have a strong feeling, which may be unrealistic, but my gut tells me that if both houses were torn down, join the lots and re-file the new plat at City Hall, the resulting land would be so perfect for building the sweetest million-dollar home in town, next to a pond no less, that it would start a bidding war between all those Design-Build architects, I would double my money overnight. Obviously I should buy the house next door and execute my plan. But I don't have the money. AskMetafilter, what do you suggest I do?
posted by shipbreaker to Home & Garden (25 answers total) 1 user marked this as a favorite
 
I mean this in the nicest way possible: stop eating dreamsicles.

You say you don't have the money. Twice zero is still zero.
posted by fluffy battle kitten at 9:56 PM on June 11, 2012 [14 favorites]


First you should realize that joining the lots might not be possible or buy you anything with the building/planning department. Second, understand that just because a lot of homes are being torn down/rebuilt, doesn't mean that a bigger one is better - the market may not support a development of the size you're thinking. Maybe the houses that are being rebuilt are what sells in this market, and a bigger one would totally flop. Even so, I think that in general, building two houses and selling them would be more profitable than combining them for the developer, so even if you combined the lots, the developer's first step might be to resubdivide them. I've seen a lot more situations where developers take a huge estate and divide it up into the minimum lot sizes for a given zone, and then build the largest house possible on those lots per zoning regulations. I've very rarely seen properties combined for one mega-house where profit is the prime motivator.

So, if this is something you really want to investigate, you first want to check you and your neighbor's zoning (they're likely the same) at the building/planning department and check your deed and any CC&R's tied to the land to see if there are any limits on lot size or building size whereby a 2x lot would gain you nothing. Then you'd probably want to talk to some sort of realtor about comps.
posted by LionIndex at 9:57 PM on June 11, 2012 [2 favorites]


You don't have to buy the house next door. Simply call the real estate agent for the property and explain your willingness to sell as a package deal. While you do not want to list the house , you are willing to listen to offers.
posted by JohnnyGunn at 9:58 PM on June 11, 2012 [23 favorites]


Well if you are so certain, you could try to get a loan to finance the purchase. Of course, that leaves you holding the bag if your plan doesn't work out. That also assumes you can get a loan to buy a second home as an investment property, and you'd probably have a tough time with that unless you have a fair amount of money already. Another approach would be to bring on an investor who would back your little scheme in exchange for a large share of the eventual profits. You'd want to network and find people who flip houses on a regular basis.

It might be worth having a talk with the real estate agent for the house next door and perhaps with another couple of agents who know your area well. Get a good sense for what your house is worth on its own and how its value could be enhanced by selling it along with its neighbor. Selling the two houses together could potentially bring some nice benefits without you having to personally own both properties at once. Before going very far with your idea, I'd want to do a lot of research to ensure that zoning issues allow you to do what you're looking to do and to see that the market actually wants to build a mega-mansion there.

Finally, the one thing missing from your question is any indication that you actually want to move. After you're all said and done with this effort, would you make enough money to buy a new home that you like better and to cover the costs of moving? I'm sure there's some amount of money that makes it worth it, but selling your house is a pretty huge pain unless you're going to get an awesome better house and a truckload of cash out of the deal.
posted by zachlipton at 10:05 PM on June 11, 2012


Her lot is 9000 sq ft, mine is 11,000, total would be 20,000. Zoning laws require you cannot build 35 feet from the pond, and you cannot build 24 feet from the road. Though I will certainly doublecheck those figures. The resulting maximum house wouldn't be THAT mega-huge. But isn't it interesting that everyone agrees that you want to build the biggest possible house on any plot of land?

For some reason I do not want the realtor to even know that I am considering doing something like this. I want the whole dreamsicle, it's mine, it's all mine
posted by shipbreaker at 10:08 PM on June 11, 2012


A teardown around here costs 30K. So, a double teardown might cost $50K.

Her house 9,000 sq ft 400K, my house 11,000 sq ft 500K, spend 50K for two teardowns, join the lots, re-file the new plat of 20,000 sq ft, sell 20,000 sq ft next to the pond for new construction. What I need is 500K.

Kickstarter?
posted by shipbreaker at 10:16 PM on June 11, 2012


Regardless your zoning laws state you cannot build this close to the road nor that close to the pond, you still maybe be unable to push the two lots into one, due to whatever restrictions -- check with your city planners or whatever dept deals with this in your town.

Are they selling the house for nothing? Are they dumping it because the person is dead? That'd make it really attractive, in your shoes, make that dream look better.

Do you have any family with a few bucks to help you on this? Esp if it's being dumped, maybe you've someone who loves you and has some dinero lying about.

It's a great AskMe, btw -- really caught my interest, be fun to see how it all comes out in this thread.

As far as "mine all mine" -- why? If you can't put together the money to pull this rabbit out of the hat, you might find someone with the exp and cash to help you with this, it means that they also believe in it and are willing to go to the end with you -- cool. My father was a home builder and so were two of my brothers, I've met lots of real estate agents that are great, and they absolutely have a great sense of whether this idea would work or not -- they are trained in realities, not castles in the skies.

Anyways, good luck, however it pans out.
posted by dancestoblue at 10:26 PM on June 11, 2012


um, is a 9000-11,000 soft house now considered "small"? oh, America.

You haven't mentioned trying to go the typical route taken by the vast majority of people who buy houses, who don't usually have that sort of money lying around - if you want to buy the property, why don't you see if you qualify for a mortgage for it? That seems a lot more likely than having a successful half million dollar Kickstarter. If you do not qualify for this mortgage then you probably shouldn't be eating this dreamsicle. At least it's not exactly a hot housing market in most places - if they're asking 500K remember you can make a lowball offer that's 10-20% below asking. The worst they can say is no.
posted by treehorn+bunny at 10:29 PM on June 11, 2012


um, is a 9000-11,000 soft house now considered "small"? oh, America.

He's referring to lot size, not house size.
posted by zsazsa at 10:38 PM on June 11, 2012


I would not qualify for a mortgage. And, no rich family members who love me.

((insert Yoda whispering "No --- there is another.))

posted by shipbreaker at 10:42 PM on June 11, 2012


Zoning laws require you cannot build 35 feet from the pond, and you cannot build 24 feet from the road. Though I will certainly doublecheck those figures.

If front and rear setbacks are the only restrictions, I'll be amazed. There may also be restrictions on floor area, lot coverage, and a lot of other things. In my area, as lot size gets larger, the proportional allowable building size shrinks.

But isn't it interesting that everyone agrees that you want to build the biggest possible house on any plot of land?


Sure, but "biggest house possible" on a given piece of land does not necessarily translate to "biggest house possible", period.
posted by LionIndex at 10:54 PM on June 11, 2012


I'm gonna go out on a limb and say that if you don't qualify for a mortgage and are $500,000 short of pulling this off that it probably won't happen.
posted by Drumhellz at 11:15 PM on June 11, 2012 [2 favorites]


Dreaming is free, go ahead. However, the reality are:
1. Joining lots is not cheap. Like all things that relate to government, it's complicated. You will have to deal with many zoning and planning committees, environmental studies, utilities, taxes, building codes... Unless you are already a millionaire building your dream home at a loss, it's almost a guarantee that it'll cost you more than what you can sell it for. Even developers can't afford to do one-off things like this for profit. They have to spread the legal cost out over many lots and building to get approved and be profitable.

2. People tends to over-estimate the value of over-built properties. Typically, profit is in bringing a dilapidated, inhabitable property back to the average value of the neighborhood. Over-building (adding bedrooms, square-footage, even nice kitchen remodeling) rarely command price increase equals to the cost of the improvement. The market price for your property is defined and limited by the its comparables around it. This is because no one with twice your income is going to house-shop in your neighborhood. Thus, a property that's price twice as high as its comparables won't sell.
posted by curiousZ at 11:49 PM on June 11, 2012 [6 favorites]


So it seems that double-teardowns are uncommon not just because it's rare and miraculous for two old homes next to each other to become available for sale at the same time, but because of an excess of government regulations and zoning laws and restrictions.

Let me reframe my question, then. What is a good real-estate/design-build blog with a smart and active community, where I could ask this very same question to them, about double-teardowns?
posted by shipbreaker at 1:28 AM on June 12, 2012


Kickstarter?

Uh, no. People do not engage in real estate speculation on Kickstarter for all sorts of good reasons. From a business standpoint, it's generally not to your advantage to have a public webpage listing the exact details of your future real estate investment plans. There are also all sorts of legal issues around public solicitations for real estate investments, and a Kickstarter post probably doesn't really cut it.

Most importantly, Kickstarter is pretty much about people funding an idea they want to support, with a smaller reward for themselves when the project is completed. Kickstarter is really not an investment platform in which you are forming a legal entity and selling equity. What would your Kickstarter funders be getting in return for their contributions? Why would "help shipbreaker buy and flip his neighbor's house" be a project that people would contribute to?

As I said above, if you want to seriously pursue buying the property and cannot get a loan to finance the purchase yourself, you need to network with real estate investors in your community, convince them of the benefits of your plan, and work out a deal in which they contribute most of the capital (and risk!) in exchange for a large share of the profits (and risk!). It's the same as financing any other business; you can either fund it yourself, take out a loan/incur debt from a lender, or recruit investors who will purchase a share of equity in the venture. If it's as sure of a bet as you're convinced, you'll have a very attractive investment opportunity on your hands. If there are risks you haven't considered yet, you'll hear that pretty quick too.
posted by zachlipton at 1:44 AM on June 12, 2012 [1 favorite]


We sold a double lot with a teardown that was then severed and two houses built on it. We always knew the land was keeping pace with the market because you could sell *two* houses, and occasionally ran tge numbers ourselves but decided since we're not builders the hassle wasnt worth developing it ourselves.

From that experience I would be surprised if it worked in reverse (joining the lots) even on a pond, unless real estate is super hot for the wealthier crew there. The big reason is time. Every month unsold is a huge loss, especially the more you've had to invest in high-end construction. Unless there are people lined up for huge houses I'm not sure it would work.

That said I think your desire for secrecy is what will do you in on this scheme. I really would start with the agent, or else look for a partnership with whoever you think is ultimately going to buy the double lot. If they won't talk to you, you already know your target market isn't that into it.
posted by Zen_warrior at 3:34 AM on June 12, 2012


Were you planning on selling your house before your neighbor passed away? It sounds like you live in a somewhat decent house in a nice neighborhood (and on a pond!), why not avoid the risk of speculating on real estate and just stay there?
posted by RonButNotStupid at 5:43 AM on June 12, 2012


Generally its more profitable to split a property into smaller parcels than join two. That's why townhouses are often split into condos.


(oh, on preview, as ZW said above.)
posted by RandlePatrickMcMurphy at 5:44 AM on June 12, 2012


So it seems that double-teardowns are uncommon not just because it's rare and miraculous for two old homes next to each other to become available for sale at the same time, but because of an excess of government regulations and zoning laws and restrictions.

That's a misreading of what was said above. The planning process means you'll have to jump through a few hoops and spend some money, but isn't normally a huge impediment. As a percentage of the total cost (including purchase price, teardowns, and new construction), a few thousand paying for a new plat and a zoning variance is nothing. (It will add a fair bit to your timeline, though; it's not a process you get done in a week.)

The actual barrier, as said above, is that it is almost always more profitable to sell two largish houses on two small lots than one huge house on a big lot (except in more unusual cases where someone is buying multiple lots for privacy, say, or where the two lots are way tinier than the norm in the neighborhood). It makes sense when you think about how houses are often priced per square foot -- two 3000 sq ft houses at $200/sq ft makes you more money than one 4500 sq ft house, for example.

But that said, if you can pencil out everything and find it makes economic sense (including all the development costs, comparable recent sales, accurate construction costs, etc), you would be in a position to propose a partnership, presumably with someone who does development in your area. I doubt that your proposal would pencil out, but if it does, that's how you would get it done.

And even if you didn't join the lots and build one huge house, it can make a lot of sense to develop adjoining lots at the same time -- you can build houses that are in architectural conversation and with a distinct identity, there are big construction efficiencies, etc.
posted by Forktine at 5:47 AM on June 12, 2012


The actual barrier, as said above, is that it is almost always more profitable to sell two largish houses on two small lots than one huge house on a big lot

This generally a rule that would be followed by developers, so if it's actually "developers" that are doing the tear-downs in your area the rule would apply.

The times that I've seen lots combined is when one really rich dude wants to build his ultimate mega-house, but that is just a rare situation - rare enough that I don't think it's really worth fishing for like you're trying to do. In the end, I think it might make sense for a developer to buy your lot and your neighbor's at the same time, but I don't think there's much benefit to you in doing all the work for them beforehand. You really don't gain anything profitwise by combining the lots yourself or tearing down the existing houses over just selling two adjacent lots and marketing them as having the potential to be combined.
posted by LionIndex at 8:53 AM on June 12, 2012


Developers can build a hella big house on either a 9,000 or 11,000 foot lot. I'm buying a house in a neighborhood divided into 5000/ 60000 foot lots, and many of the houses there are plenty big 4/5 bedroom castles.

I'm repeating what's said above, but if your theory is true, you could capture much of the value by offering to sell your house in connection with the one next door. You wouldn't get all of it, but there's no apparent path to your purchasing the home next door.
posted by Clambone at 9:31 AM on June 12, 2012


Again, you don't need to actually build the spec house to realize and capture the value of putting together two teardowns. Buy the other property and get all the approvals and gov't oks for putting the two plats together. Get architectural drawings for a possible house on the new property. Then sell it to a developer. He would make take the risk and make his money on the mark-up of building a house while you make your money on creating the value of putting the two together. Getting the approvals is worth a decent amount.
posted by JohnnyGunn at 12:05 PM on June 12, 2012


In my area, the money would be in splitting two lots into three and building as big a house as could fit onto each smaller lot. I see that much more often than joining small lots into a bigger one.
posted by procrastination at 3:42 PM on June 12, 2012 [1 favorite]


Same here, procrastination.
posted by The corpse in the library at 9:17 AM on June 13, 2012


You might also whether those expensive houses are actually selling - and how the market will look once this work is done. Are things improving?
posted by chrisinseoul at 6:01 AM on June 14, 2012


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