How do I know if a development project actually pencils?
Most bad deals were visible in the spreadsheet. They just weren't stress tested.
A defensible pro forma includes land, hard costs, soft costs at 15–25% of hard costs, financing carry, contingency, and a realistic sales or lease-up timeline — then gets stress tested at higher cost, higher rate, and longer schedule before the land goes under contract.
The cost stack owners underestimate
- Site work, utilities, and offsite improvements, which are highly site-specific
- Soft costs: design, engineering, survey, geotechnical, legal, permitting, and impact fees
- Carry: interest, taxes, and insurance during a schedule longer than planned
- Contingency on both hard and soft costs, tracked separately
- Marketing, leasing, or sales costs at the exit
Three stress tests to run every time
- Costs 10% high — does the deal still clear your return threshold?
- Schedule six months long — what does the extra carry do?
- Exit values 10% soft — is there enough equity cushion to survive it?
Where owner-side input changes the number
Cost assumptions are the weakest part of most early pro formas because they are pulled from national averages rather than local pricing. In the Lowcountry, site work, stormwater, foundation systems, and coastal construction requirements move the hard-cost number materially. A grounded cost model at feasibility is the cheapest risk reduction in the entire development cycle.
Common questions
- When should I build a pro forma?
- Before you make an offer on land, and then again at the end of due diligence with real site information. The second version is the one you finance against.
Start with a conversation.
Tell us where the project stands. We'll respond within one business day — with next steps, or a candid reason it isn't the right fit.
Request a consultation