![]() ![]() The biggest disadvantages? It does not account for the time value of money, so it is ineffective on longer projects. ![]() This approach is quick and easy and is a good method for comparing similar projects on similar time frames. You then calculate the development margin by dividing profit by total development cost. ![]() The anticipated revenue is calculated based on the project sale values, and the costs (including land but not the developer’s margin) are subtracted to estimate the net profit. The simple formula below is known as the ‘back-of-the-envelope’ approach.ĭevelopment margin = Net profit / Total development cost Using this traditional model, you estimate the total development cost in current, not inflated, dollars (including interest on 100% borrowings). When you know the exact price paid for land or can estimate its value, you can use the development margin approach to determine the proposed profit on your development project. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |