Crunching the Numbers on a Deal
So I have this property in Inglewood Ca thats on 4,914 sqft lot and zoned R2 (duplex). The property has a beat up tiny house on it 360 sqft.
The seller is asking for 400k I'm having trouble connecting the dots with my buyers as far as profitability goes though.
My thoughts were that someone could rehab the tiny house and build a second tiny house on the lot (front house back house situation) and then either sell them or cash flow them.
Here's how I crunched the numbers.
Asking price: 400k
Rehab tiny house ($75 per sqft x 360 sqft): $27,000
Build of new slightly bigger second house ($138 x 900sqft): $124,200
Misc blanket cost: $20,000
Total Invested: $571,200
Then I ran comps for what the new property would go for and I found
ARV: 720k
If the buyer were to sell, then it would be a $148,800 profit.
(also buyer could cash flow it for a few years and then sell it for a potential higher profit
Also NOT TO MENTION... inglewood property value is increasing due to the new building of the stadium.)
Does any of this matter to an investor? Are my numbers correct? Why would an investor say that this deal is priced "too high"?
Thanks in advance for your thoughts and opinions!