A good model tells you when to walk away as clearly as it tells you when to go. Here are two recent projects, one we talked a client out of and one we helped get funded. Client names and locations are kept private.
A client was looking at a 14-unit development site where some of the site work was already done. They liked the head start and planned to build it with modular construction.
Once they ran the full numbers through our model, costs, financing, timing and sale prices together, the deal didn't work. The savings from modular and the completed site work weren't enough to close the gap.
A developer had a 22-unit site in Wake County, North Carolina, with zoning already approved. Three lenders turned it down because the pro forma looked thin on year-one cash flow.
We rebuilt the deal in our model and worked through it with the developer. Adjusting the unit mix and the lease-up assumptions gave a clearer, more realistic picture of the first year.
Have a deal you want checked before you commit? Tell us about it.