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Feasibility Studies - Continued...
A
market feasibility study is an analysis of the potential near-term and long-term
market conditions within an area where a given business (a housing project in
this case) is likely to garner the majority of its ongoing sales. This
includes an assessment of the changes in population demographics, consumer
spending, employment, income, household wealth and related demographics, as well
as an analysis of the competing facilities that are already in the market and
those that are yet to enter the market. Click
here for an exhaustive look at market feasibility studies.
The cost
of rendering a housing feasibility study is based upon the scope of
work. To help you in your initial planning, we will provide a
budget for the prototypical housing development program.
The costs
set forth hereinbelow are those costs that are typically paid by the
developer in advance of the closing of the construction mortgage
financing escrow and represents the developer's risk capital in the
transaction because once the escrow closes, the developer will be
seeking to get the developer's capital funding "off the table"
and then reinvested into the next housing project.
Total
Pre-Construction Phase Expenses By Division:
-
Market
Feasibility Study: $12,500 to $15,000 (the variance relates to the
number of competing facilities that must be shopped in the market -
once the "comps" are known, the price can be locked in).
-
Financial
Feasibility Study: $12,500 to $15,000 (the variance relates to the
number of times we have to reforecast the pro forma financial
statements based upon changes within the totality of the
program/project).
-
Capital
Funding Proposal: $4,500. This is the most important document
because it will be used to solicit the required construction
mortgage financing loan for the project. You have to have
Rainmaker prepare this document.
-
Business
Plan of Operations: $2,500. This document provides the lender
with evidence that, once the financing closes escrow, the project
will be ready to complete and operate subject to a defined business
plan.
-
Site/Civil/Topo
Engineering & Surveys: $12,500.
-
Architectural
Design (Schematic Phase): $25,000.
-
MEP
& Structural Engineering: $7,500.
-
Environmental:
$4,500.
-
MAI
Appraisal: $3,500.
-
Construction
Cost Estimates: $12,500.
-
Legal/Organizational
(borrower): $15,000.
-
Legal
(lender): $25,000.
-
Accounting,
Tax: $5,000.
-
Commitment
Fees: $50,000.
-
Site
Control: Varies - use 1% of 8% of the budget as a guide.
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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