Developer’s Profit
Definition of "Developer’s profit"
The term developer’s profit is the actual profit generated by a developer’s project after the costs of the development have been covered. This profit can come from the sale of the development in the case of residential developments, i.e., each property sold generates an income out of which the developer subtracts the cost of the property and comes out with the end profit. In other words, the developer’s profit is the sum of money a developer earns in a development project after all costs have been paid. This is the offset to the investment risk and time and labor the developer has invested in the outcome of the development.
How does the Developer’s Profit Work?
While sometimes it can be called entrepreneurial profit, the developer’s profit, besides being the actual profit earned by the developer once the real estate project is sold, it is also the profit they anticipate to gain after the real estate transaction. However, in comparison to the entrepreneurial profit, the developer’s profit is based, as mentioned above, on the time, expertise, and energy of the developer, the person responsible for overseeing the overall development.
During the cost approach calculations, the measure of the project’s profit includes both the entrepreneurial profit and the developer’s profit. Usually, the developer’s profit can range between 5 to 15% of the project’s total cost. This profit is generated from the difference in cost of materials, overhead expenses, and labor compared to the end project’s value. Still, it’s important to note that the developer’s profit can be affected during certain economic conditions that impact the market. For example, if the cost of the materials ends up being much higher than initially evaluated or if miscalculations occurred in the project’s planning stages.
Popular Real Estate Terms
Assemblage in real estate is the process of combining multiple small plots of land into one larger plot. This is accompanied by plottage, which is the increase in value that occurs when ...
An upper limit on the interest rate that can be charged in a variable rate mortgage over its life. For example, a variable rate loan is initially offered at 7% loan rate, and its interest ...
Looking for an amortization definition? Amortization is an accounting term that basically means something like “reducing the gap between what is owed”. Here’s the play by ...
An individual, educated, trained, and licensed in the principles of designing structures, and rendering drawings, specifications, bidding requirements. ...
Those factors causing the movement of people, industry, and business from the central city to the outside central city areas, suburbs, and/or small cities. Elements of the dispersing force ...
Another residence in addition to the main residence where a person or family resides. An example is a second home out of the city used on weekends and during vacations. Interest and real ...
Lien which is over and above a first lien. A second lien is subordinate to the first lien and can be satisfied only after the initial lien is satisfied. ...
Projecting structure or part of a building. For example, a home was built with balconies jutting out from the sides of the building or a large rock formation constructed out into the ocean ...
An obligation of the owner of property that is recorded with his permission such as a mortgage. Encumbrance on property without being objected to by the owner. ...
Have a question or comment?
We're here to help.