So, long story short, I inherited a piece of land in a downtown residential area of a highly desirable city from a distant relative. It's a prime location for a house. I've gotten multiple offers for it already and will likely sell it in the next little while. Many of the interested buyers are developers/builders. Obviously, if they bought it, they'd just build and sell. That being the case, there's clearly additional equity potential in the property outside the value of the land - there's the development component.
Let's say I can sell it for $125,000. I can do that, take the cash and walk away. Super easy and less than a few hours of work. Alternatively I could build a 2500 sq/ft house on it for, say, $125 a sq/ft (estimate...I could be way off on that number), and sell it for $200 a sq/ft. Sales price of $500,000 minus construction costs of $312,500 would net me in the ballpark of $187,500. Obviously, there's a lot more time/effort/risk involved in building, but for an additional $62,500 it seems like it might be worth the effort.
What say you, BiggerPockets? Take the easy money or take the riskier path with potential for more coin.
My suggestion would be that you form a joint venture with a builder in which you contribute the lot (valued at FMV), the builder contributes the build costs. and you split the profits pro rata. You avoid the headache of *you* fumbling your way through the spec building process and substantially increase your upside versus selling the lot outright. I'm in the process of doing the same thing right now. No brainer, IMO.
Exactly what @Account Closed said
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