Tearing down & building townhouses

[Rob Meyer]

Hello everyone! Trying to understand the construction loan / rebuild process some more. 

Some quick info - 

- bought ~6,000 sq ft lot lot (has main house 3br 1bath, ~1200 sq feet, 1br 1 bath garage apartment currently rented) in February for $500k.
-Awesome location, and it’s one of the last old houses around, everywhere else has been converted to townhouses (sell for ~$400/500k each)

Our 5-year plan is to tear everything down and build 3/4 townhouses on our lot. If I were to do this, (and assuming simple numbers), Is it:

- pay an architect / engineer out of pocket to get a good plan for the property (maybe like ~$10k?)
- talk to a credit union about getting a construction loan for cost of rebuild (assuming $1,000,000 for simple numbers) + current mortgage (around $500k for simplicity)

- after building the properties, get it appraised by a bank (let’s say $2,000,000), which I do a cash out refinance which at 75% would be used to pay off the $1,500,000 million loan, i now have $500k equity in the house and a $2mm loan? 

Thank you so much!!! Just trying to understand the process / see if my math / understanding is wrong!!!