What Type Of Analysis to Use?

[Drew B.]

Hi all - 

I'm struggling with what the best type of analysis to use to come up with to compare investment options and wondering if anyone could help me focus on the right metrics.

I am trying to make a decision on build on an existing piece of land that I have or to buy a completely different deal.

Details:

- Currently own/operate a triplex that cash flows very well.

-Have enough room in the back of the lot to add a new duplex (zoned appropriately, etc).

-New construction costs of $200/sf @ 1,500 SF total, (750 per door) = $300k.  Leaving aside the equity built into the property which would likely be net $200k added to parcel.

- Assume - second position HELOAN on primary for full $300k (lots of equity) for 15 years at 9% = $3,050 payment per month.

-Create $3,400/month in cash flow from two new units. Net $4,200 annually.  Set aside vacancies, etc.  Essentially break even annual.

- What's the best way to think of this deal as it would be no cash out of pocket but also essentially break even?

-My idea would be to use the triplex cash flow to pay down the HELOAN in about 4 years.  Pros - quickly pay off high interest loan and begin to cashflow $40k per year after year 4 with no inputs from my W2 job.  Cons - directing tri plex cash flow away from other investments for 4 years but also not impacting my W2 lifestyle.  Basically the who parcel is paying for itself to grow.

How would you analyze or make sense of a make vs buy for this type of opportunity?  Vs say, buying another small multi with the triplex cash flow?

Thank you,