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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127236  
Subject: financing to buy, and then subdividing Date: 7/16/2013 2:30 PM
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We are looking to downsize now that the kids are out of college, and my preference is clearly to build again. DH has been looking around either for land or a house that we could remodel to our tastes, and has found an interesting property that he is now investigating more. This one is a house with 16 acres of land that can be subdivided into at least 3 lots and possibly more. Assuming we could subdivide into 3 lots, that would give us one lot that we could sell fairly quickly, one lot on which we'd build, and the lot with the house that we'd eventually sell.

Given that scenario, I am trying to figure out the best way to do the financing. I'm thinking that the order of things would look something like this:
- buy new property and move into house
- get engineering done to subdivide, and put current house on the market
- sell first lot
- build new house
- move into new house, and sell remaining lot with house

Depending on timing, we'd have mortgages on both the new property and our current house. If we sold land from the new property first, would it make sense for us to finance that property with a first and second mortgage so that we could pay off the second mortgage when the lot sold? That would then get the payment adjusted and make the cash flow easier until our existing (current) house sells, which I would expect to take longer as it is a higher end house and will be pricier.

I'm just trying to understand my options, and given that I don't know what would sell when, it's hard to figure out the best way so that we are not strapped for cash flow.

Anyone have any suggestions? Anyone ever done anything like this?

This might just be an academic exercise as I haven't seen all the data yet, but I thought it would at least make an interesting discussion, and I'd rather be prepared first rather than doing the mad scramble later.
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