BRRRR sort of...Leveraging Cash Build out vs Conventional Loans

[Carlos Mendigochea]

I live in SoCal and own Triplex plus primary home in SoCal. Looking for advice on how to best leverage $500k in cash. Question is around committing cash resources for a build vs leveraging into two additional out of state fourplexes.

Option 1

Use California SB-9 law to split my primary home (760 sq feet--3 kids and spouse) into two lots (7700 sq ft lot) and build out duplex (approximate 400-500k build out cost) 
Projected income from duplex would be $3.6k a month once complete after paying annual taxes and maintenance expenses.

Then 60% cash refi duplex (estimate built value $1M) and pull money back out for primary home expansion and next investment.

Option 2

Invest $350k in a couple out of state properties multi family income properties (Tucson market) that will have about $1k of monthly cash flow.

Directionally it would seem that option 1 would be yield the best ROI and allow for some flexibility in improving our primary residence living situation, but I am probably overlooking some items.

Looking forward to the your input.