Sell now or work with developer

3 Replies

Sell vs Develop land.   Does anyone here know how to make an educated decision on whether to sell a highly appreciated property or go into a partnership with a developer.  The sell now price is substantially higher than the capital account value we would start out with but would allow us to get into multifamily.  I have shown my accountant and attorney but no real answer, probably because too many variables and things that could go wrong.  I would love to hear of any experiences with partnerships of the multifamily buildout type.

Thank you!  Relatively new here but loving it!

not enough detail to answer your question.  

but I will take a guess at what your asking

if the developer is going to bust this into lots and you stay in you just lost your tax advantages and will be deemed a dealer at the highest tax rates.

sell now no risk.. and best tax treatment you could 1031.

if its one property and your saying should I partner and they are going to build an apartment on it and we will keep it.. that's different.. but you lose control because your now going to put a massive amount of debt on it.. all though in your area not too risky given market conditions.. and really depends on your developer  known, reputable and stable ?

so there is some feedback but you need to be more specific of what you own and what you looking to do.

Developers can be slick . You could open yourself to lots of liability , and or losses by the developers actions . A bird in the hand is worth more than ...........

Home runs feel good , grand slams even better .But base hits all day long can win the game 

Thank you Jay and Matthew,

We had not considered selling but were approached by a chain home builder with a strong offer.  We desired to do something ourselves but found a developer who has experience in apartment and townhomes for rent who would partner with us.  We plan to keep 7 years to indefinite.

Our location in King County.  The offer is $1M higher than the capital account we would get with the developer, although once up and full we would be in a better position than selling in our equity and annual income.  But it could be 4 years before we see anything and of course the project may not get approved as is and could be much less density in the end.

Might be too many rentals, might be late to the game.  I see the risk in putting the land up for a specific value that is set and the land appreciating over the wait time.  I also feel the home builder will go higher.  So our real problem is deciding if there is a price point better than developing.   I see now that even a mathematics whiz wouldn't be able to figure this ultimately depends on what gets built or how we decide to invest proceeds.  How do you make these types of decisions? 

Are there deals where the land value gets some appreciation towards capital account while waiting so long?

Either way this is a great place to be and biggerpockets has lots of inspiration!