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Updated almost 7 years ago,
Does this strategy make sense?
My partner and I looked at a property on a fairly major street in Woodland Hills, CA over the weekend. It's a small house in really bad shape that we see as a tear down. It's on a 7700 square foot that we believe is zoned R2.
So, our thought was... We demo it and build a new duplex there. They're asking $480K, but we're assuming we could get it for around $430K. A 2400 square foot duplex (1200 square feet per unit) at roughly $150 per sq ft to build = $360K So, roughly $790K all in.
We estimate we can rent these brand new units for about $2500/month, grossing $5000/month.
We're not sure what the property will appraise for when done, but if we refi once it's done (BRRR) and pull $700K out, it looks like the mortgage payment + taxes & insurance would be about $4000/mo. So, we'd net $1000/month.
I know these are rather vague numbers, but does it make sense at all??