If the goal is cash on cash return, then I would analyze how much you can pay to achieve that % return and subtract out your value add costs, and that should give you your max offer.

After you determine the price point on the lots you work backwards form there and subtract all costs of the development and a profit margin you are happy with to determine the price you can pay for the raw land.

Hey Michael, I'm curious why you have subtracted out principal in your last calc, artificially increasing ROI?

When you sell, or, if you sell right away if this is a fix and flip, your basis is what you subtract from the net amount from the sale to determine your gain.

From this adjusted basis you bring back in Depreciation at 25%, add in capital improvements/increases to basis subtract from the net sale and then apply federal, state, and ACA tax rates to the remaining to arrive at your tax liability.  

So for your $1,000 rental, about $500 a month will go to taxes, insurance, vacancy, property management, capex and maintenance.That leaves $500 from which to subtract the principal and interest payment.  

You should know what the laws are if you are doing improvements or adding/subtracting people from title.  

You then add all the revenue present values and subtract all the expense present values.

Even subtracting property management, that dog will hunt, and quite nicely.

It cost me less than $30/month and allowed me to focus on investing and building my portfolio and my business.If you do the math you will learn that you are not getting 4.5% dividends, after you subtract all the fees you'll probably end up being very close to zero.