Legal Question in Real Estate Law in California

Why combine the two? As long as the adjacent lot was legally subdivided before a certain date or had always been a separate lot, even if it does not meet the current square footage requirement for consructing a new house on it, it can still be grandfathered in. A lot that can be built upon plus another lot with a house already on it are worth much more than a house with an extra large yard [even if it could be built upon, the requirements and costs to split the two lots reduces the value]. Whether or not they are two or one lot, you personally can use the land(s) exactly the same.

The tax assessor clearly places a greater value on a house as opposed to a lot. So your current value for your lot with a house is much higher than for the bare lot you are buying. When you sell the two, for capital gain purposes the lot will have a much higher cost basis then your current house/lot. You also get a $250,000 deduction form the capital gains tax for your own residence. If you plan on selling both properties soon and your unprotected capital gains will exceed $250,000, then combining the two would make sense.