Develop, then sell and/or rent?

[Maria Murphy]

Hello,

Looking for experienced developers' opinions on a deal I'm about to make in Europe, just based on the numbers. I am about to pay the land cash 500K, then build 10 apartments for roughly 1.5M. I have 2 options:

- finance the construction pre-selling the apt, and take my profits (expected to be around 700K pre-tax); or

- finance the construction with a 6-7%/year loan (collateral = my house), keep the 10 units, and once the building is completed in 24 months, rent them for circa 180K/ year gross. Would cash-flow very little.

Obviously, a combination of the above is possible (pre-sell all but a few units, nullifying the profits, and therefore taxation).

My feeling is that the first option would allow me to use profits to build something bigger (e.g., acquire another plot). The second one to build a security net.

I've simplified the deal a lot but... am I missing out something obvious?

NB - I've done developments in other locations before.

Thnx,