Quadplex Calculation Review and Input

[Andrew G.]

All,

I'm considering an exciting opportunity to buy 3-acre lot adjacent to a K-8 school. This lot is unique because there are no other neighborhoods within walking distance, except for this one. The asking price is $150,000, which includes a very old house. My plan is to pay for the lot mostly in cash, build a quadplex on it, sell my current rental property and primary residence, and move into one of the units. Concurrently, I intend to construct our dream home on an adjacent 20-acre parcel that I already own outright.

I've double-checked the property taxes, and they're not just accurate but slightly on the higher side. Based on my market analysis, $2,100 seems reasonable for a 1,711 sqft condo in this area with a lack of apartments. We've already selected a design for the quadplex and acquired a detailed cost estimate for the build, which we project to be around $1.2 million. This area is slated to be the next biggest development in the next 10 years.
From my calculations, this seems like an ideal move, but I'm aware that there could be considerations or risks that I haven't thought of. I'd really appreciate it if the community could review my plan and share any insights or potential pitfalls I might have overlooked. Thank you for your input!

[Greg Kasmer]

Andrew - I think you've accounted for a majority of your costs, but just a few others to consider include: vacancy factor (typically 5%), turn/over or releasing expenses, and property management fees (7-10%)  - whether you pay someone else or do that yourself you might want to include in your calculation. I see that most/all lenders include vacancy in their calculation, whereas the other two expenses are sometimes included - depends on the lender. Good Luck!