Investor build to sell

[Karen T.]

I'm a realtor.  I have an investor client who has his own source of funds.  I have a lot attached to my home that he and I would like to work together on developing.  I bought the lot 10+ years ago to prevent a slash-and-burn developer from getting it and putting a home that wasn't right for the historic neighborhood (it's not designated, modern homes look extremely out of place here).  My investor wants me to manage his projects but so far we haven't found a flip because the market is so hot.  We have done several deals together and I know he's legit.  

Because of things I need the cash from the sale of the lot, and my investor is willing to buy it.  But there are several lots in the area that have not sold so I don't believe builders are knocking on doors around here (I'm happy about that, honestly...they are in-fill lots that have never been developed.)   So, we're talking about a deal like this: 

Investor purchases the lot from me in cash (which would have to be surveyed and split).
We hire a builder to build a home that fits in the neighborhood.
We sell it.  (It will sell, for sure, if priced correctly.)

Of  course I would be doing everything legally to protect my license, etc.  I would also want to have some sort of conditions on the sale of the lot that I would manage the project for a fee and that I would have influence over the type of home that is built, and that the builder would be in on the deal from the start, and it would all be structured to protect everyone and everyone gets their profit.  My investor is on board with this. 

Because I have little experience with new construction, I'm having trouble figuring out where the builder's profit is in all this.  It's not like he's building a house for retail sale.  It would have to be priced correctly to cover both parties (assuming my biggest take is the lot and a percentage for management and commission that my broker will charge.)  But we all know there is a ceiling within any market.  

We're talking in the $150-180k range here, around 1600-1800 thoughtfully planned square feet.  

It's a new idea, and I'm looking for people to poke holes.  Thanks.  

[Dustin Davis]

@Karen T. I’m not sure where you are in Arkansas but around most of the historic districts in NWA are in the $120+ ft range. If you’ve never done a new build custom home then I’d find another person to manage it. You can always tie a stipulation to the sale of the lot that the home has to be appropriate for the neighborhood.