What Type Of Analysis to Use?
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,