Calculation of the financial expenses involved in building a spec project is as important as any other expense.
Determining the optimal financing parameters can:
Increase your profit by minimizing interest expenses;
Make the project more competitive by managing the sales price;
Demonstrate to the lenders that you are aware of the importance of managing your financial obligations.
Complete the company information.
If you will be using this app regularly, complete the information, and then save the file as a Template. Then access the app and reload the template for each new project.
Complete the Project information.
Enter the expected case for each of the inputs.
The Loan Request Summary will be populated with information as the data is entered.
Lot Costs:
Make sure you add all lot costs into this calculation.
If you have been holding the lot or some time, enter the market value of the lot.
Alternatively, enter the purchase price of the lot, plus holding period interest expenses and holding period property tax expenses to determine the total cost of the lot.
If the lot cost plus holding period costs is less than current market value, use the current market value of the lot.
Construction Costs:
The construction estimate costs are entered on the Dashboard.
Enter any other costs and sales expenses here, if any.
Financing Expenses:
Will be added from the “Financing Expense Calc” tab.
Sales Price Calculation:
If you are using a Realtor, enter the percent of Sales Price.
Select whether or not to add the Realtor commission.
Cash Flow at Sale of Project:
Add other expenses which may be incurred as a negative number.
Cash Flow is not Profit. This calculation will show the movement of cash in this transaction.
Investment Return Analysis:
This will display the total profit and ROI on the project.
Analysis of the loan including loan interest by month, total interest, and total loan costs.
All inputs are completed automatically.
Document prepared for presentation to the Lender.
Once all the data has been entered, return to the dashboard, and change the “Project Information” to see the effect in the Loan Request Summary.
You can enter “Expected Case”, “Best Case”, or “Worst Case” data to play “What-If” analysis with the loan request.
Pay special attention to the effect of the changes you make on the “Expected Cash Flow”, “Expected Profit”, and “Expected ROI”.