Viability of small apartment construction in North Hollywood

[Trevor Baker]

My partner and I have flipped 6 houses in the past 4 years, so we do have some decent real estate knowledge.  Because of the changes in the market, we have stepped back from flipping a the moment and are looking for other opportunities.

One option we are considering is ground-up construction of a 4-6 unit apartment building in the North Hollywood, CA area.  As an exercise, we've located a house available on a 7900 sq ft lot for $968,000. The listing stated, "It's zoned LARD1.5, non HPOZ. This property is also tier 1 TOC for an additional 35% increase in units to build 6 units." (What is tier 1 TOC?)  It is also just inside an Opportunity Zone.  The best comp is a new build 4-unit, that's two blocks away, that is pending at $3M.

Having never done this before, what would you recommend as the steps moving forward?  Should we try to find a GC who can do the whole project from plans to permits to demo to final finish?  Does being in an Opportunity Zone give us many benefits?  Is $250/sq ft a reasonable estimate for construction costs?  We realize that the whole project will likely take 2-3 years to complete.  The exit strategy could either be to sell it at the end, or keep it and rent out the units.

Any thoughts, suggestions or advise are greatly appreciated.