When deciding to develop or not before selling, you really have to try and target your buyer and what value will your development have to them. If you don't choose correctly, or get a buyer different from what you expect, your development expense could be wasted. Most buyers will try to play down the value of a developed site even if it's just to get a better price. Only if your developed site is generating verified revenue will it help you get a better price. Even if the buyer is not interested in what you created and the income, they understand that the income will affect what price you will take.
...all domains made up of keyword combinations being actively searched for.
Yes, but are the domains getting any traffic? Without content and promotion, I suspect the traffic is low and so you are only talking about "potential" and not actual value. While some are impressed by good keywords, the value of the keywords is more when a domain is parked and not developed, when not premium. Good SEO with a bad domain can outrank a great domain with little or no SEO. It's just not a fair fight.
Lead forms can work if you are getting traffic, but if not then you also need to figure out SEO, paid search, or other promotion. There are companies like LeadPile that pay for completed forms that they sell as leads.
I would check the value of the domains with Estibot.com. If you are right about the value of the domains Estibot will say that or perhaps several times more. It tends to appraise much higher than you should expect to sell at. If you sell here you can expect to get the wholesale price which while fair, could be a few hundred each, maybe.
From what you have said, your client's investment in each domain is about $100 ($10 a year for 10 years). If the sales price is $1000-2000 then the return will be good in my opinion. But if you have to spend more money to develop, wait at least a year to sell, then you are looking at a deep cut in the profit unless the sites generate some money. I don't get the sense that you or the client have much experience in this, so it's hard to tell if development is worth it, but my feeling at this point is that it may not be.
But, if you have domains that serve a large industry, developing them into a "portal" for later sale may make sense. A modest expense over 1-3 years could result in a site that is getting quite a bit of traffic and income. And when you are ready to sell you may have clients advertising on the site who may be interested in purchasing it.
