Shane – what is the Commercial real estate development Process?
The numbers are only for illustration. You can plug in your #’ers and modify as needed
1. Demand –
Here’s how the #’er could look
Let’s assume you were renting out to someone else. Most banks will want to see ‘market rents’.
Value of your 10,000 sq.ft building:
- $25 psf x 10,000 = $250,000
- Cap rate – for this – 6% = $4,166,000 Value
(adjust based on your own calcs)???
Land- I don’t know you’re market, but I’ve worked on commercial real estate development in various cities
-Hard costs- $2M (sounds high- 200 PSF for retail construction- I’m building at $130psf for hard cost)
-Soft Costs- let’s plug 20% for safety $400K
-Leasing Fees? (you’re only paying for 4k sq.ft) 5% of your leases signed over 5 years and then 2.5% (my market- you’re -might be different). Assume $75k
-Financing Costs – Assume $100k
TOTAL Cost: Let’s call it $3.1M
Your Investment – if you can get away with 15% down – $500k
Profit – $4.1M- $3.1M = $1M
ROI – 200%?
architect- will do the layout. ?How good are their drawings? Anything missed will be Change order.
Timing- weather, zoning, city, off-sites, neighbors
- Good commercial agent who understands retail and land development
- GC with experience in retail developments
- Architect – same as above
- Mortgage Broker- who understand SBA and construction financing
- Leasing Agent to lease-up the balance of space
- Every market is different and a big piece of the puzzle for your development would be zoning, access points, services (deep).
Lot’s of moving parts.
But, you can see- if done right- you can make a very healthy profit.
I expect you’re building new – because of the potential upside. And, possibly buying and developing for below replacement value. You get exactly what you want. And, you control the process. ???
If you’re going to PM your project- min 1/week during construction.
- Demand (you have that)
- Supply (need to verify the costs to do that)
- Risks (mitigate these)
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