Appraisal Came in Low. What to do now?

[Stephen Grindle]

Hey, 

I recently bought a lot in Joplin, Missouri thinking I'd build a single-family home on it and sell it.  The appraisal came in under what the cost to build would be and I'm now considering selling the lot, moving forward with the build and hold/renting it for a couple of years or building a duplex instead.  I have not actually built anything yet, so the cost to build is based on the lowest bid I've received. Here are the details and I'd love for someone to help me find the best option forward. WHAT WOULD YOU DO IN THIS SCENARIO?

DEAL DETAILS: I can give more details if needed.

All in on property: $195,000 (including purchase of lot, plans, survey and cost to build)

Appraised at: $187,700

Bank will loan me 85% of appraised value, which is: $159,545

I'll have to bring about $35,500 to the deal without the potential of getting that money back when I refinance because the cost to build well exceeds 80% of appraised value.

Potential Rental Income: $1500 (very confident I can get this)

ANALYSIS

I've included a best case scenario Rental Analysis below, and below that are my potential exit strategies as I see it: 

View report

*This link comes directly from our calculators, based on information input by the member who posted.

EXIT STRATEGIES

1. BUILD & HOLD: Build the Single-Family Home I've outlined above and rent for $1500/month.

2. DUPLEX: Build a duplex instead (lot is zoned R2). Problem with this is I'm afraid I'll run into the same problem of not getting a favorable appraisal. 

3. BUILD & SELL: After looking at comps, I'm thinking the most I can sell this house for is $205,000. That is best case scenario. So, I'd net no more than $10,000.

4. SELL LOT: I bought the lot under market value, so I'm thinking one exit strategy is to just cut my losses and sell the lot to recoup my money. 

Thanks a ton, 

Stephen