build new or addition

[James Sun]

Hi All,

I just joined BP and would like to ask a question on my new rehabbing project.

I acquired a 1bed/1bath property in San Jose bay area for about $400k. It has about 800 sft in about 7000 sf lot. I am considering two rehabbing options:
(1) do addition and convert it to 3bed/2bath around 1300 sft. The construction cost is about 110k and ARV is about $650k;
(2) tear down the existing 1bed/1bath and build a new ~2500sft detached home and construction cost is about 400k. ARV for it about 1.1~1.2 million.

As now I prefer option (2). I have done a few rehabbing already and however have no experience with new construction. Option (2) also takes much longer to finish.

Could you give me your comments or suggestions?

Thanks,
James