If you are looking to see if the asking price for a multi-family development site makes a potential development economically feasible, your first pass analysis should be a quick, back of the envelope calculation. Back of the envelope analysis purposefully solves for a simple stabilized yield on cost assuming today’s costs and today’s rents and expenses, even though the property being contemplated won’t contract with a GC or be signing leases on apartments for at least a year.
The rationale behind using today’s values as the assumption inputs is that if we could snap our fingers and the envisioned property would appear and be stabilized, and it does not produce a sufficient yield with numbers about which we have a high level of certainty, why would we want to spend any more time on analyzing the same site with even more uncertain future assumptions values?
Our BOTE calculators have been in use for years, and are now appearing in a supercharged state on Valuate®. Our most recent one is the apartment development BOTE. A video tour is below.