Great plan
What I've been doing lately is buying home for good deal, with the intention of adding on. This house I'm in rite now will sell for around $175-$190 per sq/ft. I can build(add on) for roughly 50$ a sq/ft(not including kitchen or finish baths).
I do whatever I want rite up until permits are pulled, and I actually start the addition.
I did this with my last house, it took just over two yrs. to finish and then sell. Perfect way to avoid any capitol gains taxes. You report the profit, but don't owe shit! (Up to 250k if single, 500k if married). The house also has to be your primary residence, and YOU must have lived there for at least 2 yrs.
Gotta love America!