I’m a newbie investor - learning the ropes. I was recently driving my area and identified a home ( 2 storey - 3 bed, 3 bath - 2300 sq ft in decent shape) in a nice neighborhood in Portland that is zoned R6. The house is on a modest plot of 0.6acres , however. Property is being offered at market value. Under what circumstances if any, could such a prop that is zoned for multi family development be attractive to an investor? How much discount off market value would we need to achieve to make this a viable deal?
The existing home is grandfathered to the lot even though zoning has changed in the area.
Land value is about where you would need to be to buy, demolish the existing structure and build a new apartment / multi unit property. The existing lot will hold xx units based on R-6 density code for your area. (IE-20 Unit per acre would be 12 units on a .60 acre lot.)
The existing home will continue to be viable until such time as land value exceeds overall value and / or until the owner at such time has depreciated the home completely and deferral of maintenance makes demolition cost effective to build new.
Obviously a well maintained home owned by an owner occupant will probable always be worth more than land.
Transitional properties can be a very good buy and hold investment depending on the projected new developmental growth areas. If the property is located in an area that is undergoing transition from residential to multi-family with either property conversion or new construction, it is possible that the land value could exceed the market value of the property as a SFR.
Also, analyze the property to see if there is a way to convert the SFR into multi-family. This could open up the marketing to developers.