Tax and Insurance in Development
These questions are for the purposes of modeling a development deal. In development - what is a reasonable assumption for insurance costs as a percentage of total cost? Or should it be as a percentage of hard/soft cost? Also for taxes, for a development I assume a reasonable assumption is to apply the tax rate to total development cost (should this also include land cost?). And when would the taxes payment kick in? Once the development is complete?
These all depend on the municipality, build type, and the project’s potential income. There is no hard and fast rule.
insurance about 600 per unit per year and property taxes find out the mill rate and do the calculation based on 500k per unit assessment
Yea... OP don't do this.
development consultants hate this one simple trick...
My insurance/unit costs can vary by $600 within one MSA
“My development deals do not pencil how are you guys still building”
Tell me you've never done a dev deal without telling me. You need to speak to local property tax specialists and an insurance consultant to estimate your builders risk and stabilized property insurance. This varies wildly by deal / municipality as mentioned. You also need to capitalize prop taxes during the entire development period as well as for the 6-12 months ops & insurance (prior to construction start, builders risk during construction) and utilities during pre-dev and construction which is separate from the former.
Assuming the GC isn't carrying Builder's Risk. Also assume carrying subguard.
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