What should I do with this vacant lot? (Los Angeles, CA)

I'm trying to weigh my options with a vacant lot next to my house.

So I live up in the foothills in Los Angeles, and managed to buy the vacant lot next to my house. It wasn't crazy expensive, and we used a HELOC to buy it.

There's a few pros and cons of the lot.

Pros: Quiet street, nice view, there's a natural stream on it. Up in the hills and could be very picturesque.

Cons: Not in the most desirable part of LA. We are far enough up in the hills that we have to be on septic instead of sewer.

So here are the options as I see them. But I'd love some feedback and ideas on what to do.

1. Build an ADU and rent it out. My wife and I's alma mata is near by, so we would probably try to rent it exclusively to students there. I feel like this would be the safest way to avoid most "renting pitfalls". The septic gives me a bit of pause to be honest though.
2. Build a house there and sell it. I feel like this is the smartest and easiest option. Just build a nice new house on the lot and sell it.
3. Demo our house and build a bigger house across both lots - This would probably be my preference, but honestly it also sounds a bit like a nightmare logistics-wise.

The main problem is that I've obviously never built anything before, and I don't have the cash to front any of it so I'd have to finance it. But I'm also fairly risk adverse, and it's hard for me to financially gauge how risky this is.

We paid $175k for the lot. Our house next door is currently valued at $1m according to Zillow (no idea how accurate that is, but based on other house prices in the area seems about right).

So I'd like to think we could at least sell the house we build there for $1m or around there.

(Yes I'm aware that $1m for a house in what I'm calling an undesirable area sounds insane. But that's HCOL areas for you)

If we built an ADU, it would be 2bd/2bath and could potentially get around $2500 - $3000 a month. This is just based on looking up rent prices in the area for similar houses.

And just extra info, we honestly bought the lot to preserve our view. We bought it directly from the seller before it went on the market. But we've been considering moving and I feel like it would be dumb to not capitalize on the lot before we do.

So I'm just looking for advice on what to do and...honestly...how to even get started? Who do I contact? How do I get financing? What's even the first step to all this?

submitted by /u/Thenadamgoes
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source https://www.reddit.com/r/RealEstate/comments/1wnheuw/what_should_i_do_with_this_vacant_lot_los_angeles/