How do you estimate the costs and revenues of your land development project?

Development of commercial projects or large residential projects involves much more than what is outlined in this article. It involves at a minimum some or all of the following: zoning check, utility locations / capacities, impact and building fees, property ALTA survey, geotechnical study, Phase I ESA / Phase II, biological survey, tree survey, topographical survey, etc.

On the development side, right now it is best to primarily do infill development. Infill simply means we’re not going out to the suburbs and developing brand new tracts of land and putting utilities in and building subdivisions. Instead, just start by taking existing land, usually lots or pieces of land in more of the urban core environment and doing development there, say anything from single-family houses to duplexes.

One of the most important aspect of cost estimates of any Real Estate Project would be to know the quantum of Built-up Area possible to be constructed on the land. This Built-up Area is the function of (1) FSI / FAR norms prescribed in local town planning Regulations and D.P. of an area, (2) Zoning of land (3) Reservations and Amenities presribed for land in DPs etc etc. Town Planning Regulations are popularly known as Development Control Regulations (DCR) / DCPR (Development Control & Promotion Regulations). Costs of FSI / Premiums payable, Development charges etc add upto costs of permits. Land cost, Development costs etc complete the bracket of Costs involved in project.

For commercial projects it’s much more complicated because there can be a lot of factors to consider such as: detailed scope of work, soft costs, hard costs, financing / capital costs, fees, etc. Its critical to work with an experienced developer that understands all of the components and appropriate contingencies, etc. That’s what we do at www.capitalRivers.com

I use Rehab Valuator on the software side, we use it for creating construction budgets, estimates, scopes of work, managing the project. We can build schedules of each project from the software in app accounting and we can use it to track our projects in real time. Before we even get to that stage, we use the software to raise capital usually from local banks, for construction loans and then permanent finance.

The initial step is to formulate the project, followed by gathering and confirming the financial requirements of all professional laborers involved. The subsequent step involves establishing clear timelines for each task and distributing financial resources accordingly across the project's duration. Once the timelines are established, sales projections can be initiated, along with marketing and advertising efforts for the land development. The selling price of the project can be informed by analyzing similar projects.

This is the #1 most important step and the most difficult. To truly understand the risk factors and how to mitigate those risks requires a lot of experience and a team of experts. Development is all about managing risk while maximizing reward. It’s a delicate balance and often where even the most experienced can get in trouble.