How to determine to build or not? How to underwrite a new build?

[Allen L.]

Hi all,

I have a piece of land that I want to build a duplex on. The area is a B-/C+ area with mostly single family homes average vintage in the 1950s with average sale price of 100K. There aren't many new constructions other than a handful. How do I determine whether building a duplex on the land is worth it? Say it cost 250K to build incl. soft costs, how do I determine whether it will appraise for over 250K?

Also, how do I budget for new construction after I get an estimate of appraised value? Say it can appraise for 300K, how do I back out construction costs? Say someone quotes me 120/sqft, at 1800 sqft that's 216K, including soft costs let's say 230K. How much should I budget for shortfall?

Thank you