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
method of land description that identifies a parcel by specifying its shape and boundaries. ...
a rental in which the lessor pays all operating costs such as taxes, utilities, insurance, and maintenance. It is usually a short-term lease and a common arrangement. Typically there is no ...
A narrow passageway between buildings providing secondary rear access. ...
Same as term resale proceeds: Net amount received when property is sold. It equals the selling price less outstanding mortgage balance less all costs incurred in connection with the sale. ...
Same as term real estate: Also called real property. Anything permanently affixed to the land, such as buildings, walls, fences, and shrubs, as well as the rights to own or use them. It is ...
Income for investors arising from net long-term profits of a real estate mutual fund realized when the portfolio is sold at a gain. Fund managers pass on profits from sales of real estate ...
Trademark name for shotcrete. ...
(1) Land adjacent to a lake, river, or stream that can also be part of a flood area. (2) Land at the bottom of a valley or glen. ...
When talking about the open space ratio we are referring to a term that is used in zoning laws and regulations. The open space ratio is a term used to measure open space on a developed land ...
Have a question or comment?
We're here to help.