OfflineYesterday I found a property on the MLS that was listed as a single family home. It had been listed for exactly 100 days. Let me just say that this place looked rough according to the pictures and for the life of me I don’t know why an investor hadn’t picked it up. So I went with my business partner to look at it and see if there is anything we could do with the property. Much to our surprise, when we got there we saw that it could very EASILY be turned into a duplex! This immediately adds some appeal to our buyers. We calculated a rehab and ran the numbers and decided to put in an offer.
The point of this story is that many investors wrote this property off because the numbers were marginal if they are calculated on a single family home basis. But looking at this home as a duplex they were much better. Therefore, always be looking for opportunities to make a deal better.
That is a great discovery.
I learned, a long time ago, to look for a properties highest and best use.
In some areas, you may find a property that has a large lot, say .5 acres or bigger, and the zoning would allow for an additional house or for multiple units to be built the same lot. If you buy the property at the right price, it makes more sense to sub-divide the lot and build the additional house, or tear it down and redevelop it for the multi-unit project.
If you do find that it is possible for another house, or multi-unit, a good way to "wholesale" it, is to create a plat rendering showing the potential other house or multi-unit and resell it to a developer at a much higher price. You have to do some work, but could make a lot more money than a basic wholesale deal.
You can also start doing the work yourself, with the city planners, to get approval for the project. The more work you do, the higher the resale value is. If you take it to full city/county approval, you dramatically increase the value of the property. At that point you would have to decide if you want to do the development yourself, or sell it to a developer at a substantially higher price.
I know this is pretty advance stuff, but it opens up doors that many investors won't even think to look at.
Jim
Great find. Just make sure that the zoning will allow for conversion into a duplex.
I am surprised that more investors do not see conversion as a great investment opportunity. Besides changing single family residences into duplexes, there is also converting homes to offices for those properties that are in a transitional use district. Another is subdividing farmed land or large homesteads into home developments or large warehouses into storage units. The possibilities are endless for a creative mind that knows how to accurately project costs and returns.