The opportunity has presented for you to develop a parcel of land with 25 residential units. Selling expenses include legal expenses on sale of $1,200 per unit, marketing of $7,000 per unit and agent’s commissions of 2.5%.

The project is expected to produce 10 one bedroom units and 15 two bedroom units. Prices for the individual units are expected to be $420,000 for one bedroom unit and $500,000 for two bedroom unit.

Total estimated development costs include:

Professional fees: 8% of the construction cost

Headworks contributions: $30,000 per unit

Construction costs: $130,000 per one bedroom unit and $180,000 per two bedroom unit

Holding costs: $25,000 per annum

The period of development is 3 years

Acquisition costs: 6% of the land purchase price

Mortgage finance: 11%

Anticipated Profit and Risk Margin based on total outlay net of selling expenses is 20%

All costs and expenses have been shown as GST exclusive and all being inclusive of contingency.

How much you can afford to pay for the land?

Answer rating: 100% (QA)

To determine how much you can afford to pay for the land we need to first calculate the total development costs and then subtract them from the expect... View the full answer