I Need South Los Angeles Duplex Construction Advice

[Andy Mirza]

I'm starting to make my new farm area South Los Angeles, Watts, and Compton, California. I've noticed that a lot of investors are tearing down older, smaller houses on R-2 lots and building duplexes on them. I got a call from an agent yesterday who's trying to connect me with the seller of one of these houses. I'm running the numbers to see if a regular rehab would work but I want to keep my options open in case a duplex builder can pay more. My intent is to wholesale the deal to a builder/investor or a rehabber and learn.

The subject property is a 3 bed 1 bath, 1100 sq ft single family residence built in 1910. The agent suggested I might be able to get the house for $215k. If the property was rehabbed as a 3/1, the ARV is $285k so I'd need to get it for under $200k for the deal to make sense (depending on the necessary repairs).

As a brand new duplex, the ARV is about $550k. The new duplexes tend to be 3200-3400 sq ft. If I use $100 sq ft for construction costs, we're looking at $320k-$340k. $215k purchase price plus $320k construction = $535k total which wouldn't make sense. Should I use a lower price per square foot for a builder's construction costs? Am I not accounting for something? I'd appreciate any advice to help me evaluate these kinds of situations better.....