Phase the subdivision and start selling lots early, or finish all 46 and deliver at once

Question

46 lots, one entrance, and my engineer can plat it as one phase or split it into two of 23. Two phase costs me about $60k more in total because some of the mass grading and the erosion control gets mobilized twice, and the storm outfall has to be built to handle the whole thing either way.

What I get for the $60k is revenue eighteen months sooner on the first 23, which pays down the development loan and takes real carry off the second half. What I give up is that the builder buying them would rather have one closing on all 46 and told me so, and there's some argument that a half-built subdivision shows worse to a retail buyer if I end up selling any lots individually.

I keep going back and forth. Which way would you run it?

samantha_ruiz · Answer

Phase it. $60k against eighteen months of carry on 23 lots' worth of land and improvements isn't close on any loan I've had, and the interest you save is only part of it. The bigger thing is that phase one selling proves the price to your lender and to yourself before you've spent the second half of the budget. If lot pricing moves against you, you find out with half your money still in the bank.

The builder wanting one closing is a real preference and it's also just their preference. Ask what they'll pay for it. If the answer is nothing, it costs you $60k to make their accounting easier.

Phase the subdivision and start selling lots early, or finish all 46 and deliver at once

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