Land development, subdivide, place homes and sell?

[Michael Koncaba]

Hello BP,

Thought I would gather the masses to help my partner and I bug out a deal that sounds a little too good. I would like to accurately estimate ALL of the costs here because we dont know what we dont know. Then we will package the deal together nicely to sell to another investor with some more capital or other lenders that may lend the funds, since we only have about $40K in cash.

Please pick this apart and estimate all you can. Tell me what we are missing or where we are very wrong. We don't want to take on a project this big yet if its not worth it.

Here is our plan:

We are in Brazoria county, Texas and there is a 3 acre plot of land for sale nearby for $60K. My partner is an agent and was looking at other recent smaller plots in the area with nice mobile homes on them selling for $180K-200K each. I have not seen comps personally, but I know this type of home is at least moderately popular in our area so we may have an opportunity to purchase, subdivide into three 1 acre plots, level them, add a long gravel driveway that splits into three and leads to a nice double-wide mobile home on each lot. We would of course ensure all the necessary public utilities are added to the land and connected accordingly.

Here are our very preliminary estimates on what these lots might sell for and what it all might cost. Trying to be conservative with each as well..

Sale price of each lot - $150,000                   Total Sales = $450,000

Price of Lot = $60,000

Clearing, leveling, prepping land = $30,000

Adding Gravel and road = $16,200   (6ft X1500ft X $1.8/sqft) Guessing here on length/cost.

Mobile Homes $20,000 X 3 = $60,000

MH Transport $5,000? Approx. 30 mile trip

Adding utilities $25,000

Borrowing Costs = $30,030 (15% of total expense assuming borrowing 100% of deal as quick estimate)

Property taxes/other Fixed costs = $4,000 

Total Costs = $230,230

Cost/lot = $76,743

Potential profit at $150K/lot = $219,770

Now that Ive made my risk averse estimate, my partner the awesome agent says he could sell them for $180K each at least, which could put our profit over $300K!

We ran through this together the best we could so far and it seems too good to be true. We aren't aware of many of the costs I am sure, or are overestimating the sale price of each finished home and lot more likely. but either way there is a ton of room to be wrong here so I would love to know what everyone thinks. Are we this naive? or could we sell this deal to an investor? Who could we look to for more guidance locally? 

Looking for tough criticism, but if you agree and may want to talk about lending us funds or coming on as a partner, message me! 

Thanks, BP

[Jay Hinrichs]

its hard to follow your numbers as they are not clear.

let me try.  this is per unit. 

20k raw lot purchase price

20k  for mobile home

5k to move and install

6k  for rock road

9k  for utls

10k  cost of capital 

2k   closing costs.

5k  misc

77ki total all in  round up to 80 or 90k each for safety and fudge factor

sell for 150 to 180 each..  minus sales costs of 8%  or  12k to 15k each.

so total all in 95k to 105k each  minus 150k  = 60 to 80 k each profit.

One glaring thing I see is  20k MH are junkers usually. so how are you going to get full retail for an old used double wide.

new double wides are 70 to 120k each.

Also is this well and septic..