Your ratio is not unusual, and the instinct to pull on that thread was the right one.
On a subdivide-and-sell deal, the hold period typically runs from acquisition through county review, plat recording, and then the sell-down of individual lots. Each phase costs money even when nothing is moving. Interest on any acquisition loan, property taxes, and insurance all accrue whether the county is reviewing or not. Eleven to thirteen months is a realistic timeline for a six-lot split with an active county process, and some deals run longer.
The 30% ratio, $38k against $127k projected profit, is not automatically a red flag, but it does depend on what that $127k already accounts for. If the sponsor built the $38k into the cost stack and the $127k is the profit after those costs, the ratio is not your concern. If the $127k is gross margin before holding costs, your take-home is closer to $89k and the ratio matters a lot. Those are two completely different deals, and decks sometimes blur that line.
The specific thing worth pressing on is the sell-down assumption. Four to six months to sell six lots means roughly one lot per month. Ask the sponsor what comparable lot sales in that submarket actually look like, days on market and volume per quarter, because if the market is slower, the hold extends and your $38k estimate climbs.
I am not certain what a "normal" benchmark looks like in the Flagstaff area specifically, and I would want to confirm comparable lot absorption rates with a local land broker or title company before treating any number as reliable. The strategy guide for this approach covers entitlement risk and cost stack in more detail under the Guide tab.
What does the sponsor show as the cost basis per lot before any profit assumption?
