If you have a relatively large lot just waiting for you to build your next rental property, you have a bigger canvas. You can get a bit more creative with more land and can decide on such things as the size of the home, a deck or even a swimming pool. Your lot may even be large enough to build twotwo on one properties separate houses on the same property. Does that ever make sense?

It’s called a “two on one” in the real estate industry. Two separate residences on the same lot. It might make sense for you to build two properties on the same lot. Compare building two with just building one home. What could you rent a large single family home for in the area? Say that your lot could easily accommodate a 4,000 square foot home. How many renters can afford the rent for a 4,000 square foot property? If there aren’t very many renters in the area that may be hard to figure out. If you determine that the rent for such a property is closer to $3,000 per month, would you have a hard time finding someone to lease at the price?

By building two homes on one property you can access the rental market where there is a greater demand. Instead of one rent at $3,000 per month can you get a better outcome with two rentals at $2,000 per month? It’s easy to run the comparisons to see if it would work but two smaller homes might cash flow much better. If that’s the conclusion you reach, then you need to take one final step.

A “two on one” is an oddity of sorts. Rarely will you find two homes on one lot and if you ever do you won’t find any others. That means there are no comps and should you decide to ever sell, conventional financing will be hard, if not impossible to come by.

To remediate this problem, legally divide the lot into two with each property having its own defined lot. It’s slightly a bit of a hassle but if you can make so much more over the long haul then it’s something to consider.