Half the value of this house is the back half of the lot

Different question. At 188k with a 5 percent unlevered yield, what does 205k plus 22k of subdivision cost get you compared to just buying two 130k houses somewhere cheaper? You'd have two tenants, two roofs, and no entitlement risk. I ask because I've spent six months building a list and every clever deal I looked at closely was worse than two boring ones.

Dumb question from the paper side, but who is carrying you while the plat sits in review? If it's 6 months of debt service on a house that rents fine, that's survivable. If your lender wants the loan sized off a two-parcel appraisal you haven't got yet, that's a different problem. I'm still learning how this side works so tell me if that's not how it goes.

@meridian is right that you should spend on the survey. I'd still bid the house.

My version of this took nine years. I bought a house because the rent worked, and the surplus land sat there paying nothing but taxes until the town extended sewer down that road and the split became cheap. If I had paid for the lot up front I'd have been carrying dead value for most of a decade. Bid 188, tell them why in writing, and if someone else pays 205 you have lost nothing except an option you were going to guess the price of anyway.

Your management line is light. 9 percent of collected is the monthly fee, and most agreements I have read also take a leasing fee, often half to a full month, plus a renewal fee. On a house that turns every two years that's another 40 to 90 dollars a month averaged out. Also 1,700 maintenance on a 1958 house with original plumbing feels like the number you want rather than the number you'll get. Push both and your 5 percent is a 4.4.

The thing that got me on a split like this: the county reassessed both parcels after the plat recorded and my tax bill on the house went up even though the house didn't change. It was a couple hundred dollars a month across two properties, which sounds small until you subtract it from a 5 percent yield. Ask the assessor's office how they treat a newly created parcel and how they reassess the remainder, and get the answer from the assessor rather than the planner.

Worth calling the same planning office back and asking for the written checklist for a minor subdivision, they usually have a PDF. And the timeline on plat approval and recording varies a lot by state and county, some places record in weeks and some sit for a full review cycle, so don't build your carry assumption on the phone call. If you end up marketing the finished lot yourself, whether that trips licensing depends on your state.

Let me make sure I've followed this. A lot split means you legally divide one parcel into two so the back part can be sold or built on separately? And the reason it's valuable is the vacant lot sells for more than the extra yard is worth to a tenant. Have I got that right.

@juniper yes, that's it.

@arbor, price the house on the house. Zero out the lot. If the split happens it shows up later as a return you didn't pay for. The moment you put lot value in the offer you are paying today's price for an outcome that depends on a county process, a survey you haven't run, and a utility connection cost you admit you don't know. I have watched two deals go bad on exactly that structure, and in both cases the entitlement worked and the timeline killed the return anyway.

If you want to keep the upside without buying it, ask for a longer inspection and use it to get the engineer's letter. That's the only version where 205 becomes defensible, because then it isn't an assumption anymore.

In my markets the surplus lot is worth less than the paperwork. I looked at a place last year, 78k house on 1.4 acres, and the two-lot split would have cost 14k in survey and driveway culvert against comps at 19k a lot. Your 45 to 60k listings are the part I'd verify hardest. Listed is not sold, and in a fair number of states you can't pull the actual sale prices at all, so find an agent who will tell you what those lots closed at and how long they sat.

Frontage minimum is the easy test and you pass it. The ones that kill rear lots are the driveway standard and the setbacks off the existing structure. Check whether the county requires the new lot's access to be a certain width and paved, because a 12 foot paved drive with a turnaround is real money, and check where the existing house's septic field or well sits if it isn't on public utilities. I lost a split once because the drain field ran under the exact strip that would have been the new lot's access.

Also ask if there is a stormwater or lot creation fee. In one county near me that alone was 6,800 dollars.

I'd bid 188 and spend 2,500 on the survey and engineer's letter during inspection. If the letter comes back clean you have a reason to go up, and you'll know what you're paying for.