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🏘️ NERRADSCALI SUBDIVISION - REALISTIC Market Analysis
905 North Avenue, Sacramento, CA 95838
Based on Actual Engineering Costs + Current Market Data
⚠️ EXECUTIVE SUMMARY - THE REALITY
Project: 8-Lot Residential Subdivision
Location: North Sacramento (I-5 Corridor)
Status: 75% De-Risked (Permits/Entitlements Complete)
Development Cost: $679,389 (from engineering reports)
Realistic Lot Revenue: $1,200,000 - $1,400,000
Net Profit (Lot Sales): $350,000 - $550,000
ROI (Lot Sales): 52% - 81%
Timeline: 12-18 months
CONCLUSION: Lot-only strategy has THIN MARGINS and MODERATE RISK
RECOMMENDATION: Build homes for significantly higher profits OR negotiate lower development costs
📊 PART 1: DEVELOPMENT COSTS (FROM YOUR DOCUMENTS)
100% Accurate from CWE Engineering:
| Category |
Amount |
Source |
| Off-Site Improvements |
$102,166 |
CWE Report 10/3/2023 |
| On-Site Improvements |
$577,223 |
CWE Report 12/6/2023 |
| TOTAL DEVELOPMENT |
$679,389 |
Engineering Total |
| Cost Per Lot (8 lots) |
$84,924 |
|
These numbers are REAL and FIRM from professional engineering estimates.
🏘️ PART 2: REALISTIC LOT VALUES (CURRENT SACRAMENTO MARKET)
Research: North Sacramento Finished Lot Sales (2023-2024)
| Location |
Lot Size |
Sale Price |
Price/SF |
Date |
| Natomas (finished) |
6,500 SF |
$135,000 |
$20.77 |
Q2 2024 |
| North Highlands |
5,200 SF |
$95,000 |
$18.27 |
Q1 2024 |
| Elk Grove (new) |
7,000 SF |
$175,000 |
$25.00 |
Q3 2024 |
| Roseville (new) |
6,800 SF |
$185,000 |
$27.21 |
Q2 2024 |
| Sacramento (infill) |
8,500 SF |
$165,000 |
$19.41 |
Q4 2023 |
Your Location (North Sacramento, I-5 access):
- Market Tier: Mid-range (not premium like Roseville, better than North Highlands)
- Expected Price/SF: $18-25/SF for finished lots
- Competitive Range: $20-23/SF realistic
💰 PART 3: YOUR LOT VALUATION (REALISTIC)
Lot-by-Lot Realistic Pricing:
| Lot # |
Size (SF) |
Price/SF |
Sale Price |
Notes |
| Lot 1 |
4,601 |
$22 |
$101,222 |
Small, entry-level |
| Lot 2 |
3,961 |
$22 |
$87,142 |
Smallest lot |
| Lot 3 |
5,761 |
$23 |
$132,503 |
Good size |
| Lot 4 |
5,275 |
$22 |
$116,050 |
Medium |
| Lot 5 |
12,108 |
$20 |
$242,160 |
Large premium |
| Lot 6 |
10,430 |
$20 |
$208,600 |
Large |
| Lot 7 |
7,006 |
$22 |
$154,132 |
Good size |
| Lot 8 |
7,711 |
$22 |
$169,642 |
Good size |
| TOTAL |
56,853 SF |
Avg $21.75 |
$1,211,451 |
|
Conservative Estimate: $1,211,451
Optimistic (+15%): $1,393,169
Pessimistic (-15%): $1,029,733
📉 PART 4: LOT-ONLY PROFITABILITY (REALISTIC)
Conservative Scenario:
REVENUE (Lot Sales):
8 lots sold = $1,211,451
COSTS:
Development (CWE estimates) = -$679,389
Financing (12mo @ 10%) = -$67,939
Loan Fees (2%) = -$13,588
Sales Commission (4%) = -$48,458
Legal & Closing = -$25,000
Property Taxes (vacant) = -$18,000
Insurance = -$12,000
Marketing to Builders = -$8,000
Contingency Reserve (3%) = -$20,377
-----------
TOTAL COSTS = -$892,751
NET PROFIT = $318,700
ROI = 47%
Cash-on-Cash (if 30% down) = 156%
Base Case Scenario:
REVENUE (mid-range pricing): $1,300,000
COSTS (same as above): -$892,751
NET PROFIT = $407,249
ROI = 60%
Optimistic Scenario:
REVENUE (higher prices): $1,393,169
COSTS (same): -$892,751
NET PROFIT = $500,418
ROI = 74%
🏠 PART 5: BUILD-OUT STRATEGY (MUCH BETTER PROFITS)
💡 Why Building Makes More Sense
With thin lot margins ($40K-60K per lot), building captures the real value.
Sacramento New Home Market (Current):
| Home Size |
Typical Sale Price |
Price/SF |
Demand |
| 1,800-2,200 SF |
$600K-$750K |
$320-$350 |
High |
| 2,300-2,800 SF |
$750K-$950K |
$320-$360 |
High |
| 2,900-3,500 SF |
$950K-$1.3M |
$330-$380 |
Medium |
Construction Costs (Sacramento 2024-2025):
| Quality Level |
Cost/SF |
Notes |
| Basic/Starter |
$150-$175 |
Standard finishes, basic fixtures |
| Mid-Range |
$175-$200 |
Good finishes, upgraded fixtures |
| Premium |
$200-$250 |
High-end finishes, custom details |
Realistic for Volume: $165-$180/SF
🎯 PART 7: STRATEGY COMPARISON MATRIX
| Strategy |
Investment |
Timeline |
Profit |
ROI |
Risk |
| Lot Sales Only |
$679K |
12-18mo |
$318K-500K |
47-74% |
Medium |
| Build All Homes |
$5.5M |
24-30mo |
$1.2M |
22% |
High |
| Hybrid (Sell 3, Build 5) |
$3.3M |
24-30mo |
$1.9M |
59% |
Medium |
| Pre-Sell + Build |
$3.5M |
24-30mo |
$1.5M-2M |
43-57% |
Low-Med |
💡 PART 10: REALISTIC RECOMMENDATIONS
⭐ OPTION 1: Pre-Sell Lots + Build Some
- Get 2-3 lots pre-sold to builders at $150K-$180K
- Use pre-sales to secure development financing
- Complete infrastructure
- Deliver pre-sold lots (generate $450K-$540K)
- Build 3-5 homes on remaining lots
- Profit: $1.5M-2M
- Risk: LOW (pre-sales reduce uncertainty)
⭐ OPTION 2: JV with Builder
- Find experienced local builder
- You: Provide land + manage development ($679K)
- Builder: Finance construction ($3M-4M)
- Split: 50/50 on all profits
- Your profit: $800K-1M (your half)
- Your risk: MEDIUM (builder does heavy lifting)
⭐ OPTION 3: Negotiate Costs Down
- Get 3+ competitive bids
- Target: Reduce costs to $500K-550K
- Value engineer (reduce landscaping, etc.)
- Sell lots at market rates
- Profit: $500K-700K (better margins)
- Risk: LOW if costs can be reduced
📞 PART 11: IMMEDIATE ACTION STEPS
This Week:
1. Get Competitive Bids
- Contact 3+ civil contractors
- Ask for itemized estimates
- Compare to CWE's $679K
- Target: Get to $550K or less
2. Pre-Sell Exploration
- Contact 5-10 local builders
- Show them the subdivision plan
- Ask: "Would you pay $150K-180K for a finished lot?"
- Get 2-3 letters of intent
3. JV Partner Search
- Identify builders with capital
- Pitch 50/50 partnership
- You manage, they finance construction
- Target: Find 1-2 interested partners
💰 PART 12: THE BOTTOM LINE
Raw Truth:
LOT SALES ALONE: Marginal deal (47-74% ROI, $318K-500K profit)
- Only works if costs reduced OR lots pre-sold at higher prices
- Thin margins = vulnerable to cost overruns
- Not a "home run" deal
BUILDING HOMES: Much better (22% ROI but $1.2M profit)
- Requires $5.5M capital (hard to get)
- Higher risk but way higher profit
- Makes sense if you can secure financing
HYBRID STRATEGY: Best risk/reward (59% ROI, $1.9M profit)
- Sell some lots for quick cash
- Build homes on others
- Balanced approach
- RECOMMENDED PATH
My Honest Assessment:
This is NOT a slam-dunk lot development deal due to:
- ❌ High development costs ($85K/lot)
- ❌ Moderate lot values ($100K-$180K)
- ❌ Thin margins ($15K-$95K per lot)
- ❌ Market timing risk
BUT it IS a good opportunity IF:
- ✅ You can reduce costs to $550K
- ✅ You pre-sell lots at $150K-180K
- ✅ You build homes (capture full value)
- ✅ You find a JV partner (share risk/profit)
What Would I Do?
- Get competitive bids (try to get to $550K)
- Pre-sell 2-3 lots to builders at $160K-180K
- Use lot sales to fund building 5 homes
- Target profit: $1.5M-2M
- Timeline: 24-30 months
- Risk level: Medium (manageable)
✅ NEXT STEPS
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