Per zoning code)Can be done as a carry back for the land purchase and all cash for the guest house construction.Market value once complete = $600k (similar home lots are going for $700k+ so this is a conservative estimate)Apply for a cash out conventional bank loan.Use the cash out to build the main house.Main House = $200k (3+BR/2.5BA - approx. 1,800 s.f.)Live in the main house and rent out the guest house for cash flow to help out with the mortgage payments)Build some equity, savings, and give some time for possible appreciation.Build a second main house = $150k (3BR/2BA) 1,500 s.f.Sell off 1/3 acre with second main house on it = $550kOriginal investment = $360k + $75 k + $200k + $150 k = $785kSelling of second main house = $550kResults in 2/3 acre with a 3+BR/2.5BA main house plus a income property for only $235kI know this is all big picture stuff and is not including loan fees, RE fees, and other soft costs.The reason the construction prices are low is that I am a architect/builder who will self GC the projects.I am looking for any feedback on this deal and possible problems that I am missing.I have not done a deal this big before and am looking for some experienced advice.Thank you for your time.Locus

Feather the nest but, don't make it to soft for renters. 

If you want to be a property manager and deal with calls about leaking faucets and broken towel rods, etc, then you can reduce that 50%. 

One thing I heard a few times is there are so many new developments in areas such as the Carolina's that the rental market can get soft fast. 

You are still going to need to have someone maintain the yard, wash sheets/towels in between guest (unless you require guests to do this before leaving), clean the house, etc.

I'm looking at my first deal and my broker is telling me the deal makes sense , even though it's cash flow negative... he says (and I agree, with some reservations) it makes sense from an appreciation standpoint.

It...

Yes you might save a little on the rate, but hard money/soft money DSCR programs are meant to take up the slack in the lending market that banks just don't understand. 

@Selena Walsh -- I would love to meet you some day -- us both being local.1) Cost 2) Handles all laundry (provides sheets, towels, etc) and paper products (TP, Paper towels, etc).3) I think I'd prefer some that charged by turn vs a % cost of the rental4) All inclusive (I don't want to have someone take 28%-40% and not give the option to provide or manage snow, lawn, etc)5) Shares guest information (all names, email, addresses, phone, etc). 6) I'd prefer the person be able to be at the place within an hour to handle any issue in person if need be.

I will come in with the hedge fund and pay for $50,000 in soft costs including survey, architecture, engineering, geotech if needed, land design and permit intake fees.

Nice idea on towel racks.