Real Estate Ground-Up Development Feasibility 2027 Calculator
Run a quick ground-up real estate development feasibility check for 2027 — land acquisition, hard construction costs, soft costs (design/permits), financing interest carry, exit value, and profit margin. Decide if a deal pencils before committing to a full pro forma.
The 5 Cost Buckets
Ground-up development has five cost buckets: (1) Land acquisition. (2) Hard costs — actual construction, site work, materials, labor. Typical $150-300/sqft for standard multifamily, $200-450 for high-end. (3) Soft costs — architecture, engineering, permits, legal, environmental, marketing. Typically 12-20% of hard. (4) Financing carry — interest on construction loan during build period. (5) Sale costs — commission (5-6%), closing, marketing.
Why 15-20% Profit Margin Is the Standard
Developers typically demand 15-20% profit margin (profit ÷ net exit) to compensate for risk: construction delays, cost overruns (10-15% typical contingency), permitting changes, market downturns during the 18-30 month build, and capital tied up. A 10% margin disappears with a single material cost spike or 6-month permitting delay. Below 15% margin requires high confidence in execution and cost certainty.
Construction Loan Carry
Construction loans typically fund 75% of hard + soft costs, with the developer providing 25% equity plus the land cost as additional equity (or a separate land loan). The loan is drawn progressively as construction milestones are met. Interest is paid on the outstanding balance only — typical to assume 50% average outstanding over the build period. For an $8M loan at 9% over 18 months, expected carry is roughly $270k.
Sensitivity Analysis to Run Next
After the base case, run sensitivity on three variables: hard cost (+10%, +20%), exit value (-5%, -10%), and time to complete (+3 mo, +6 mo). If any sensitivity scenario drops profit below 10%, the deal is too thin. Best practice: only proceed if base case is at least 18-20% margin, leaving cushion for the inevitable surprises. Also: model the exit at both sale (developer fee model) and refi-and-hold (annualized cash-on-cash).
Sources: urbanland.uli.org development benchmarks 2026, biggerpockets.com development guide. Last updated: May 2026.