If you have been investing in the Austin market for some time, you've probably heard people talk about 7000 sq ft lots. If you are renovating existing properties, this number may not mean much to you.
On the other hand if you are a developer, builder, and even a wholesaler, this number can make a big difference in what kind of profits you will see. So, whats the scoop? Here you go:
7000 + square foot lots in MOST Austin neighborhoods will allow you to build 2 detached homes. WARNING: Some neighborhoods will allow the 2 detached homes on a 5750 square foot property. Don't leave money on the table!! Check with neighborhood planning.
There is no sub-dividing or rezoning involved. You simply impose a condo regime that can be handled by a local real estate attorney.
Per city of Austin regulations, the FAR or Floor to Area Ratio, is 40% of the total lot size. For simple numbers lets say the specific lot that we want to build on is 10,000 square foot. The B unit (typically the back house) must be no larger than 850 square foot of living space. We can add a garage if it fits into the impervious coverage requirements. Assuming that we are maxing out the FAR for the B unit, this would leave your A unit at 3150 square foot or smaller (always review COMPS in order to ensure that you can sell a house this size).
10,000 Square Foot Lot
* 40% FAR
= 4,000 Square Foot of FAR
4,000 Square Foot of FAR
- 850 Square Foot B Unit
=3,150 Square Foot A unit
Here is the kicker. Some B units are selling for over $400 per square foot in today's market. We've even heard rumors of $450 per square foot. These are perfect bachelor pads for the single techie that just moved to Austin.
Wait one second, it gets a little better. If the property has a 50 foot front, you can build ATTACHED A & B units, also known as a duplex. The duplex allows you to take the FAR and divide it evenly between the units. As long as the condo regime is imposed, you are able to sell both units separately.
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