LOT Split and 2 separate duplexes

[Sebastian Marroquin]

Working on this transaction with my buyer client! (note that he is a contractor and engineer, so his costs will be much less). 

This is just an example of what some of my clients are doing, and I wonder who would be interested in something like this. 

He is buying a LOT that is 10,000 sq ft 

He is already in the process of splitting the lot and has preliminary plans to put 2 separate duplexes on the property. 

The duplexes will each be 800 sq ft and 2 bedrooms and 2 baths. 

He will be all in (Land and permits, plans and construction ) for about $1 million dollars. 

Then I will help him sell each lot for $700k to $750k each. 

(for the end buyer: they can now put 5% to 10% down payment to purchase this and the rents will be in the $2800 to $3200 per side). 

Right now, we checking with our lender to see if he wants to use a construction loan for the entire project with only 5% down payment or 

just use cash for it. Using a loan will certainly add leverage and the ROI will be much higher, but using cash feels safer to him and will have no holding costs.

He stands to make around $350k to $400k profit after commissions and fees.

With cash: he will have to come out of pocket : $1 million 

With construction loan: he will need $50k plus about $50k in fees and holding costs: $100k total ($150k to be safe) 

WOuld you do this deal? 

would you use all cash or the bank's funds?