Maintain your old Siemens Hipath system

Real Estate Feasibility Study (Cost Side) - $1.2 Billion Developer Tells You How To Do One

There are two sides to real estate development feasibility study: The Cost Side & The Income Side.

I am going to concentrate in this article on The Cost Side.

Having told you that a feasibility study is vital when applying for finance, it is however, just another cog in the wheel of the property development process.

To help you come to grips with the term, feasibility study, it might help you if I call it a, Financial Analysis, of all the costs and income revenue that tell you if your development will produce a profit.

Where To Start?

When you are at the very beginning of preparing a feasibility study ? I mean when you are just thinking about buying the land on which you propose to develop a building, your initial cost figures are liable to be a bit 'rubbery.'

They're general ? they are not exact and can't be exact, because all you know at the beginning is the 'asking price of the land.'

Hopefully the land cost will be less than the asking price after you complete the buying negotiation. Can you see that there is going to be a difference in just that first item of the feasibility study ? land cost?

OK ? if you accept that, you'll also accept that the associated land costs will also vary. Items like conveyance costs, legal charges, stamp duty, adjustment of utility charges and other costs.

That should demonstrate to you that a feasibility study goes through several stages.

The first stage uses figures that are the 'best' figures you have available at the time. The last stage is when all your cost figures are firm and final.

But as you are only at the stage of deciding to buy the land or not, you figures are "general and loaded with safety" ? in dollar terms.

Let's be clear about what I mean here. For the land cost you would use the full asking price and all the associated costs, at full calculation for your initial entry in the feasibility study. Then if you negotiated a lower price you are safe.

If you first feasibility study shows a satisfactory profit return for the risk of doing the development, you will proceed and gain legal control of the land.

Well, to gain control, you must have concluded a negotiation on the land sale price ? so you have now "firmed up" on one of the cost items. Hopefully it is lower than, or the same as the figure you allowed in the feasibility study.

In the first feasibility study you will allowed a figure for the fees of the design consultants.

People like the architect, the engineer and so on. Well now you have to engage them to create the initial design for you and again this is a negotiation that will either be within your feasibility study allowance or not.

The next major item in your feasibility study will be the constructions cost.

If your development comprises ten town homes, that are aimed at the luxury end of the owner occupier market, your market knowledge may tell you that you should allow $180,000 per to town home or $1.8 million to build all ten.

Your design team will have to design well within those cost parameters and after the initial design is complete in preliminary format, you will need to get a few master builders to give you a price.

If you are well within the $1.8 million, then you may decide to leave the $1.8 million figure in your feasibility study. This would be smart if the buider's figure was say, $1.7 million.

The extra $100,000 acts as a safety buffer as you are only pricing off non-detailed preliminary design plans.

Now. let's say it's your intention to sell all these town homes at a profit, so you have allowed some marketing costs to cover sales commissions, brochure printing etc. in your feasibility study.

At this stage the biggest figure is the sales commission and so you have been out talking to agents and so you have a good idea that your figures are OK.

At this stage we have wrapped up all of the "major" costs except the finance costs or interest on you borrowed development finance.

By now, hopefully you will have bought my e-book, and know how to go about seeking development finance the correct way and not the dumb way.

So you will not only know the best interest rate, but more importantly, have the correct type of loan and on the correct "terms" ? you know the small print stuff.

At this stage everyone I teach wants to buy a software program so that they can get all the calculations done "easy like."

Well I have a problem with that ? I know, and believe, that for you to get to know your development intimately, you have to go to the trouble of doing the feasibility study figures manually - it is only adding, subtracting and multiplying some figures.

It is not difficult and the benefit is that you get to "know" the importance and interplay of each figure on the end result, being profitability.

So a simple spread sheet broken up into months on an XL is all you need.

In month one you buy the land for $286,500 and associated costs of say, $21,700 so you enter a figure of $310 ($308,200 rounded up to $310,000 ? you have added a bit of safety in this one item)

Note: never use the full figure allways round up and take off the last three zeros - so $310,000 becomes $310l; $3,500 becomed $3.5 and $800 becomes $8. This makes it easier to read and creates less mistakes.

You then spread the design costs across the page to reflect the negotiated deal you did with the designers.

Then the construction costs ? marketing costs and so on. You can divide these individual costs up into a many smaller items as you wish.

But the real thing you are doing is setting out your best estimate of the flow of cash that is required from the Lender and also from your own equity funds - the Cost Cash Flow.

Once you have these figures spread across the page you add then vertically for a total monthly figure ? and also horizontally for each item total.

Hopefully the big development cost total in the bottom right hand box is equal to the vertical and horizontal totals.

It is ? great; go to the top of the class.

Earlier I mentioned that you will have concluded the terms of your development loan.

Well, let's say that the Lender has agreed to lend you 80% of your costs. This means you have to provide 20% from your own capital resources.

Having got the monthly totals you can now calculate 80% of each figure, because this is the amount on which you will pay interest.

It is these figures that you now calculate interest on each monthly cash flow and arrive at a total cost of the finance for your development.

You now add the total interest figure to the Cost Total and arrive at what we call the Total Capital Cost of your development.

There are a total of about 44 item headings that make up the Cost Side of a Feasibility Study.

Author & $1.2 Billion Developer, Colm Dillon, Has Written The Best Selling 'How-To' E-book, "Residential Development Made Easy," With Readers In All States Of The USA, Canada, Australia, New Zealand, UK, Ireland and 79 Other Countries Of His Independent Web Site, http://www.realestatedevelopmentcoach.com/ez

In The News:

Bullied boy hailed 'young warrior' as he leads out all-star rugby team
Sat, 22 Feb 2020 10:50:00 +0000
A nine-year-old boy who was left suicidal after being bullied because of his dwarfism has had "the best day of his life" as he led out an all-star rugby league team in Australia.

Italy reports second coronavirus death as infections worldwide pass 77,000
Fri, 21 Feb 2020 12:50:00 +0000
Two people have died of the coronavirus in Italy in the space of 24 hours.

Ryanair boss accused of racism for saying terrorists are 'generally Muslim men'
Sat, 22 Feb 2020 08:52:00 +0000
Ryanair boss Michael O'Leary has sparked outrage for suggesting would-be plane bombers are more likely to be Muslim men - and airport security should focus on "where the threat is coming from".

Giorgio Armani accuses fashion industry of 'raping' women
Sat, 22 Feb 2020 09:09:00 +0000
Giorgio Armani has been criticised for remarks in which he accused the fashion industry of "raping" women.

Sanders tells Putin to 'stay out' of election after 'Russian help'
Fri, 21 Feb 2020 21:53:00 +0000
Bernie Sanders has told Russian leader Vladimir Putin to "stay out of American elections".



tikatoshop.it

Erfahrungen mit Pallhuber Wein
Agen Bola SBOBET Terpercaya

Travel in comfort and at your leisure with CT Airlink Limousine & Car Service for top quality private transportation and exceptional customer service. We operate Sedans, SUVs & Vans for CT Car Services to covering all Connecticut airports including Car Service from CT to Newark Airport , Mohegan Casino Uncasville CT, Foxwoods Casino Mashantucket CT, Manhattan Cruise Terminal NYC, Brooklyn Cruise Terminal NYC and Bayonne Cruise Terminal NJ. CT Airlink hire licensed and friendly chauffeurs who have in-depth knowledge of the Areas.

Real Estate: The Consumers Will Have The Final Word!

"The first step toward change is awareness. The second step... Read More

Real Estate Business

Starting real estate business is not that simple. Multiple aspects... Read More

How to Build a Real Estate Investing Power Team

As you continue to read about real estate investing, you... Read More

Investment Real Estate -- A New Twist: Be the Bank, Not the Landlord, and Get Rich Without the Work!

I was a landlord for a decade, and I believe... Read More

Get To Know About Building Codes & Town Planning Applications, If You Want To Build A House

These are real building questions that I received from readers... Read More

Thinking About Selling Your Home?

Owning a home is the original American dream. It's the... Read More

You Dont Need Health Insurance!

Seems almost every situation in our lives is centered on... Read More

Real Estate Negotiation Secrets

When you bought your home, you offered less than you... Read More

Real Estate Disputes And Partition

What if two people pooled their resources and began investing... Read More

One Stop Shop for Buy to Let

As the buy to let market continues to go from... Read More

Dont Sell It Yourself

Don't sell it yourself! Sometimes a "FSBO," or house "for... Read More

The Most Sensible Investment Decision Youll Ever Make

So much advice is bandied about on the internet and... Read More

Real Estate Internet Marketing Is The Way To Go

Real estate Internet marketing is a booming business, along with... Read More

Fixing Houses for Resale: Three Beginning Steps to Increase Profits and Have Fun

Real estate investors specializing in fixers make higher profits when... Read More

7 Marketing Methods for Real Estate Coaches

You shower, shampoo, dress your best, check to see if... Read More

Residential Income Property Financing: Part 2 of 3

Welcome to the second segment of a three-part series about... Read More

Feel At Home Faster After You Move

Moving to a new community can be a great adventure,... Read More

Give Your Home A Timeless Feel

In the world of real estate, there is a huge... Read More

Flipping or Fixing Houses for Profit

Many real estate investors make $5,000 to $10,000 or more... Read More

Should You Buy Real Estate Now

I have been seeing the market on fire for a... Read More

Dead Deals and Recycled Reports

Everyone knows that at the end of a home inspection,... Read More

How to Use Design Psychology to Stage Your Home for a Top-Dollar Sale

A new business venture to help home sellers, home staging,... Read More

Product Review of Carelton Sheets No Money Down Course

Real estate continues to be a very important part of... Read More

Real Estate Investing - House Problems

Houses can have lots of problemsReal estate investing requires expertise... Read More

Seller Financing - Six Safety Tips

Why offer seller financing when you sell? A higher price,... Read More