Tear Down In Inglewood. Are my numbers wrong?

Question

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!

Brenden Mitchum · Answer

Hey Account Closed

Have you asked your investor for their reasoning? I agree with you that "It's priced too high," is not enough explanation. Maybe the real reason is "It's priced too high with all the uncertainty currently going on." That is a lot of cash; maybe not in LA but still. Perhaps they can't get that kind of financing right now? So my first suggestion would be to get some more information from your buyer.

My second suggestion would be to renegotiate with the seller. Capitalize on that uncertainty and see if they would take less. Or perhaps the seller would be willing to finance part or all of the deal and you can kill two birds with one stone?

Please, feel free to message me anytime if you have questions or just want to chat.