There were a lot of costs that we didn't expect like the plumbing had to be completely redone.

The best place to start is with a spreadsheet that has every every cost itemized. 

However what happens when the tenant vacates and now the unit has to be turned over/takes a few months to find a new tenant and during that same period of time the sewer line goes and you get hit with that $15,000 cap ex expense in addition to the vacancy and turn over costs.

Please see the rough numbers below :Tear down house price 350k,Construction cost 165 sqft * 2 build=627k Darnell, did you get your questions answered?

@Dhruv Patel I believe you are getting ahead of yourself....Where in the US are you all-in (land acquisition, soft costs, hard construction) on new construction multi-family for $100/ft.

Also, you can't know how the cost of materials could fluctuate over your project time, so consider purchasing any materials upfront so you can stick to your budget. 

Potential solutions include federally backed loans with lower rates or tax incentives to help offset the cost of a new mortgage, encouraging these homeowners to sell to new owner-occupants.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years.

And that can cost you time and money.