New build opportunity

[Devan Mcclish]

I have a new build opportunity. This would be my first build so any feedback would be much appreciated.

Purchase price = 140k

Demo = 10k

Build a horizontal property regime, 2 homes on the same parcel. The city recognizes these as a duplex and have already given me the green light to tear down the existing home and build up 2 new units.

Build 2,200 square feet at $100 per square foot = $220,000 a unit = $440,000 total 

440,000 + 150,000 = $590,000 total investment

taxes = $2,000

insurance = $1,500

holding costs = $200,000 HELOC at a 4.25% interest only loan. The other $400,000 is from private money at 10% interest.

ARV for HPRs in my area are $180 a sqaure

2,200 x 180 = $396,000 x 2 = $792,000 

792,000 - 590,000 = 202,000 - 3,500 = 198,500 - 40,000 = 158,500 - (708.33 x 6 [mortage]) = 154,250.02 - 23,760 (realtor fee, I have a license so I will capture the other 3% back) = 130,490.02 - 23,000 in potential closing costs = 107,490.02 gross income.

[Devan Mcclish]

In my area, a HPR is considered a duplex, it's already zoned for a duplex. The zoning is RS7.5. I spoke to zoning and planning and both cleared within 5 minutes that I can tear it down and put up two units on the same lot. It is technically two single family houses but they are attached as one structure. The zoning prohibits more than one structure. Because it's only one structure it's not in violation, and I don't have to rezone anything