Building Rent Houses

[Janne Zaccagnino]

I have recently bought 4 subdivision lots in a good area of Memphis Tn. Good schools, desirable area and not a war zone. New houses in the area have recently sold for about $$130,000. (1708 heated sf. With a 1 car garage. 3 br 2  1/2 bath.  All bedrooms are on the second floor). Two of 3 houses sold before the house was finished and the third house isn't finished yet. 

I bought 4 lots around the corner from these 3 new houses.   About 40% of the houses in this phase of the subdivision are owned by investors and they are rented out. I want to build and hold. I have a reputable builder who will charge me basically cost plus 10%. 

The rents in the area are about $.80-$.83 per foot ($1295 -$1300  per month). At this rate based on what I expect construction, constr. Loan interest, and all closing costs, I expect to make about a positive $500 per month cash flow. (I got the lots for a steal.)  however this all looks too good to be true. I'd like advise on what I'm missing. 

I will be out of pocket about $15k for the lots, not each, all 4. They are not in a flood plain. They do have some nasty easements running through them and a typical builder would be required to have a custom house designed for two of the lots and the other two while small I already have designs that would work. My advantage is that I can design the houses start to finish. So having cheap lots and free plans is my best advantage but it stops there. 

So, anyone with building experience who can advise me on things to NOT do or things TO DO would be most helpful. No advise will be refused. 

Thanks in advance. 

Janne