Underwrite a subdivide at retail absorption, or at a bulk exit with retail as the upside
Take a 48 acre parcel where the ordinance supports 9 lots without a public road using existing frontage and one easement, with frontage as the constraint on pace. If comparable lot sales in the submarket run $58k to $66k with roughly a dozen sales across a few sellers in the last 18 months, honest absorption often lands near three lots a year, or about 36 months to clear nine. Two ways to underwrite it. Retail absorption: nine lots at $60k, staged over 36 months, selling costs spread across the sales, taxes and note carried on the unsold remainder, the stream discounted back. On a basis around $312k that can produce a present value profit in the $148k range, sensitive to nearly every input. Push absorption to 24 months and it climbs meaningfully; push it to 48 and the carry eats a third of it. Bulk exit: a regional builder paying somewhere around 65 to 70 cents on the retail dollar for a finished nine lot plat, closed in one transaction shortly after the plat records, can produce a smaller but faster profit, often in a third of the time. Anything captured above the builder number by retailing instead becomes upside that was never underwritten. The retail case is honest about value and dishonest about certainty. The bulk case is the opposite. Which one governs the offer price is really a question of how much the operator is willing to carry.
Which number sets your offer price on a subdivide-and-sell?
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