1 -> 4 units in East Bay Area. Should I do it?
Hi everyone!
Long time reader, first-time poster.
I found OFF-market property in San Lorenzo (East Bay area). There is 1200 SF 3 bd/2 ba old house sitting on 9000 SF lot with grandfathered duplex zoning.
Appraisal for the property is $615 000. ARV is around 700k.
I can purchase it with cash for 455 000.
The plan is:
- remodel the current home (50-60k) and rent it out, cash-out with 5/1 ARM
- subdivide the existing lot into 2 SFR lots and prepare all plans - $30k and 6 months
- build a first ADU ADUs on the first lot with existing home (700 SF, 2 BD/1BA) - $175k and 6 months
AND build a brand new 1200 SF 3 BD/2BA home - $300k and 6-8 months, rent them out, cash-out with 5/1 ARM
- build a second ADU ADUs on the second lot (700 SF, 2 BD/1BA) - $175k and 6 months, cash-out with 5/1 ARM
Cash flow:
- in 3 months (after the main home remodeling) - 3k/month
- in 9 months (the first ADU built) - 5.4k/month
- in 12-14 months (the second home built) - 8.4k/month
- in 18-20 months (the second ADU built) - 11.4k/month
Result:
I will invest initial 455 + 60 remodeling + 10 misc (taxes etc)
I will have ±975k in loans (to cover new home and 2 ADUs built out - the cost of construction is 650-700k approximately)
I will have 2 SFR with ADUs in Bay Area with ±11k gross rental revenue.
They could cost up to 2 million with 5% CAP Rate.
Please, share thoughts