Whether you are a developer, builder, equity firm, or investor, a third-party consultant cost to complete is imperative to have for any land deal. You will typically see one all-in cost or a per dwelling unit cost for the project they are proposing to develop or buy. When we go back to the beginning of how that cost is comprised, there are many different conditions, restrictions, and scope understandings that go into creating the final cost estimate.
Depending on the level of plans and understanding where one may be in the development process, we always start by understanding what exists. This typically takes a visit to the site to analyze any restrictions or faults that may be in play before developing the proposed site. We have seen every situation you can imagine in raw sites whether the site has been previously used as farmland or a dynamite plant. The existing land and/or restrictions can make or break a land deal. From here we need to understand what’s proposed. What is the end goal of the developer/builder at the end of the day? Do we need to phase the project a certain way for cash flow purposes? What are their financial and marketing goals? Once we fully understand the goal trying to be accomplished at the end of the day, we can then begin quantity verifications also known as “takeoffs”.
Quantity takeoffs verify each construction item in the plan sets proposed by the engineer/designer. This can vary if your project does not have any plans or is not in the process of creating plans. You may have a site plan or a drawing on the back of a napkin that needs to be designed. We conceptually design and analyze the improvements, utility infrastructure, movement of dirt, and fees that would go with the proposed layout. These quantity checks are essential for not only verifying quantities of each improvement and cost but also making sure there will not be change orders once the project is being developed. This saves time, money, and stress in the future for any deal.
Once we finalize and exhibit all quantity takeoffs and assumptions, we begin putting the cost estimate together in a unique format that helps the client understand exactly what area is being driven by a certain cost. Our final CTC exhibits a particular understanding of the construction costs, phasing, and constructability that are linked to your project and helps underwrite any deal based on the backing of quantities and cost.
It is essential to have a third-party consultant complete an estimate for any/all projects or deals. The cost estimate not only helps mitigate risks on any project but can also give a clear explanation of assumptions, restrictions, and unknowns for you to move forward and complete a land deal. This gives you a sense of security in knowing every detail is accurately portrayed and backed by quantities and cost.
Blog Written By: Noel Smith, Director of Budgets and Cost Estimates
Comments or Questions? Please feel free to reach out to Noel at nsmith@murowdc.com
