Residential Development Question

[Kenneth Paul]

New to this and wondering what to expect cost/profit-wise.

6.2 acre rectangle approved by city for 22 homes and approved house type (starter home area <$250k). 3 homes on land need to be taken out and road, sewer, electric put in. Right on main road that's already very developed. One straight court down the middle of property needed. Homes in the area average just over $100/sf. $550k for lot. 

[Greg Dickerson]

Originally posted by @Kenneth Paul:

New to this and wondering what to expect cost/profit-wise.

6.2 acre rectangle approved by city for 22 homes and approved house type (starter home area <$250k). 3 homes on land need to be taken out and road, sewer, electric put in. Right on main road that's already very developed. One straight court down the middle of property needed. Homes in the area average just over $100/sf. $550k for lot. 

 There are a lot of variables to the equation. The best thing to do is get pricing from builders, site work and utility contractors to determine your costs then work deal backwards. If you think the sales price is $250k per house for 22 homes thats $5.5 million in sales. Back out commissions and closing costs of $385k, raw land cost of $550k that leaves you $4.565 million to develop the land and build the houses and make a profit. I like to have a 25% net profit after all costs and expenses which would be $1.375 million so that leaves $3.19 million to develop the land and build the houses. Divide by 22 houses that leaves $145k per house including land.