Family friends inherited teardown in Santa Monica - what to do?

[Will Johnson]

Hello all,

First post to the great BP forum! I'm a commercial brokerage agent in LA, but happen to have a family friend who inherited an old house (definitely a tear-down) on a 7,500sf lot in Santa Monica, CA. Nearby new-construction is selling for anywhere between $4-7MM. The lot in question was appraised at $3MM and there is $100K left on mortgage.

The family is split on what they want to do with the property; some members want to sell the lot, others see this as an investment opportunity for a nice rental property. I've come to BP to ask for some advice on what best practice would dictate here: from my point of view, this is a golden opportunity for development, but residential is not my field and I'm not versed in what it would take to utilize a construction/rehab loan for this type of situation.

Would be interested and appreciative to hear any advice on this, especially the pros/cons of using this as a development opportunity.

Thanks!