Example 25 Cost Estimating using Per Unit Model Evaluate 5-acre (front 2-acre + rear 2-acre) waterfront lots for rental condominiums (32-unit building on each lot) Initial Costs Purchase prices: $300,000/acre front, $200,000/acre back - Legal fees, applications, permits, etc.: $70,000 - Site clearing & preparation: $2000/acre - Paving roadways, parking, curbs, & sidewalks: 25% of each lot at $40,000/acre Construction costs: $2,500,000 per building Recurring costs Taxes & insurance: $4000/month per building Landscaping: 25% of lot at $2000/acre/month Security: $1000/building + $1500/month Other costs: $1000/month Revenue (assume 90% annual occupancy) Front lot units: $2800/unit/month Rear lot units: $1950/unit/month Other revenue: $5000/month Estimate Initial cost, annual cost, & annual revenue How long is going to take to pay back the initial cost of the construction - consider cost over time is constant Copyright Oxford University Press 201