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
Amount charged for each unit of rental property. An example of a unit might be square footage of space or an apartment. ...
A clause that may be inserted into a purchase agreement or a lease indicating that subject property must be properly maintained in order to validate the contract. The effect is to create ...
A right or interest in property held by a third party, which often limits the use and diminishes the value of the property, but usually does not prevent the transferring of title. The more ...
Depressed, poorly kept locality that may include vacant businesses. It may be a high crime area. The people living in the area are typically poor and there may also be homeless people. ...
The first mortgage on property when other mortgages exist as well, as in the case of a wraparound loan. For example, the total amount financed might be %200,000 of which the first lien is ...
A scholar second mortgage definition would go something like: a loan with a second-priority claim against a property in the event that the borrower defaults. But that’s too stiff, ...
A recorded plat defines a subdivision map that you have to file in the county recorder’s office. It will show the location and boundaries of your parcels of land. Knowing this, we can ...
A flexible price that may be adjusted. A resolved situation between two or people or parties through discussions in which common interests are modified. For example, real estate ...
Landlord's right to receive the value of the tenant's property to pay for unpaid rents or for damages to the leased premises. ...
Have a question or comment?
We're here to help.