Builders/Developers - What are your minimum deal standards for profit?

[Allan Smith]

I'm referring mostly to 1 - 6 unit SFR spec builds. I'm trying to figure out what my minimum deal standards should be when making offers on land. For context, I'm looking at developments where I am the builder and manage the project, and I bring in a money partner as the LP. I write it as me getting a builder fee, then a percentage of profits from the sale.

The metrics I'm leaning towards are:

1) profit of GP/LPs together, as a percentage of ARV

2) GP profit as % of ARV (without builder fee since in this case as GP I'm also the builder)

3) What my minimum builder fee should be

Do you use any of these metrics? How do you decide if a build is profitable enough as a spec build?

And for those of you not builders but focusing on development of 1 - 4 unit builds, just take out the part about me being a builder. What is enough profit after paying your builder and accounting risk, opportunity cost, etc?

Edit: in case anyone needs a bump to start thinking: I think a minimum profit to split between LP and GP would be 10% of ARV. It gets more complicated from there though. A builder would likely charge a fee of 13 - 18% of build cost with perhaps a $40k minimum. I could see taking less however as I would also get to double dip into profits from the project.