Best use analysis, how to look at this? Am i missing something obvious?
Bought a development land (residential) Looking for the best use to maximize risk adjusted return. 

Land acquisition:
Parcel price + costs = 530k

Development:
Option 1 (12 units): develop 2 buildings with each 6 apartment units. sale 4.1mil construction cost 2.7mil, profit: 870k

Option 2: develop 6 houses. Sale 2.5mil , cost 1.4mil, profit 570k

Option 3: divide into 6 parcels and sell each one seperately, sale 900k, costs not yet known (+-30k) profit 340k.

Option 1 is a lot riskier than option 3 which has almost no risk…

My question is how to quantify risk in this deal? cost of debt is only 2% over here and financing option 1 wouldnt be a problem. Option 1 however needs an underground parking spaces which costs a lot an carries risk. 

Thankyou in advance for your responses.
[{"id": "hxys076", "text": "Do you have all your soft costs in there?  What about land development costs?  Tap fees and all the other city or county fees?  Those costs are low in my market for all in development cost.  \n\n&amp;#x200B;\n\nHave you accounted for entitlement costs and time - To subdivide or get approval on any of those, in my market is 12-18 months through City approvals and $100-200k in engineer and planning fees on a small parcel like that.", "replies": [{"id": "hy2uy5d", "text": "I have accounted for everything yes. This wasn\u2019t really a question about the assumptions but are these costs really low in your market? We barely get a 20% profit margin and that\u2019s only because we bought the land under value\u2026", "replies": [], "depth": 2}], "depth": 1}, {"id": "hxyveie", "text": "The cap rate is a measure of risk. Highest and best use is option one due to the most profit. HOWEVER, just because something is the highest and best use of the property does not mean that it is what YOU personally should do. You have your own level of risk aversion and financial situation. We cannot answer that for you.", "replies": [], "depth": 1}, {"id": "hxz7b58", "text": "How I see risk here is your experience building up.\n\nIf you have experience building multifamily the risk is lowered.\n\nWhy not build apartment units, rent them out and refinance?\n\nHow is the capital situation? Do you have the ample funds to build the project without running out of money?\n\nHow is the rental market? Vacancy rates and median income vs target rents.\n\nTo quantify that into percentages is being a little too egg headish.\n\nI would rather go down every single potential risk that way then to put a global risk % on the project.", "replies": [{"id": "hxz9pz0", "text": "We use a straight loan to finance the deal and sell the units during the construction period. That way the deal kind of prefinances itself. It's not the normal investment structure. This is why it's confusing me a bit from a financial analyst standpoint.", "replies": [{"id": "hxzdb0w", "text": "I wouldn't try to analyze the deal the same way you are looking to.\n\nI would aggregate sale data for similar buildings and town houses and see volume, how many competitors are sitting on market, time on market if sold, sale prices, location. That will tell me how risky the deal is on the sell side.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hxzcm4n", "text": "Option 3 requires so little effort so npv is almost the same as the profit. Maybe i should just discount the cashflow from option 1 at a higher rate and if the npv is still higher, option 1 is the way to go?", "replies": [], "depth": 1}, {"id": "hyagx62", "text": "Use option 1, im a direct lender for multi family build to sell. Shoot me a message I'll get you a good quote. Thanks.", "replies": [], "depth": 1}]