The budget and cash flow

The project costs

This is the cost of actually completing the useful part of the project, purchasing land, building, adding facilities etc.

Promotional or agents costs

How are you going to get people involved, if the project is really good and you get publicity perhaps you will get a queue of people and have no promotional costs. On the other hand if its a holiday complex, then perhaps you could end up spending half the size of your main project costs on commissions to sell the properties.

Legal costs

Deeds, agreements, conveyancing......... Don't forget rights of way, far more costs here than in a conventional property development, but you will probably find you can get a flat fee per person or unit. 

If you are buying your own home you can always do-it-yourself, but with  projects involving others, you will find there is no escape from using solicitors, but shop around, for a good deal. It does not matter where they are based, some in the Welsh valleys with lower overheads could very well charge far lower fees than a London firm, and be more prepared to haggle on fees and give you time commitments to do the work. 

Guarantees

Look at guarantees, often in practice a form of insurance, and probably essential unless you are all equal partners in the development. If using a builder see if he will provide this. In addition to reducing your own risk to unknown liability, this is likely to be needed for people to get mortgages.

Consultancies

In Britain you may well find that you 'need' to use consultants who just happen to be councilors if you are to get the planning permission you need. Likewise in some other countries various forms of bribe are an accepted part of the economy. 

We agree its wrong, and we are all against it, but you may have no choice but to go along with existing practice, just don't suggest it. Local estate agents, should be able to tell you what is going on in their area.

If you want to change things then join the Independent Inquiry Society (another New Atlantis Trust), or some other investigative group and forget about starting your development. 

Adding it all up

List all items and get as accurate a costing as you can, but also consider what happens when prices change or the unexpected happens, can you pass it on or do you need to built in a reserve to allow for this.

Deciding on the pricing for participants can then be done. Look at what you need, but also at what others are charging for anything that is similar in the same area. If you can price above what you need to, this will cover any problems that come up, If you want, build in a  formula for a percentage of the surpluses to be returned or have other improvements in mind to do with it.

The cash flow

Expenditure

Extend your listing of expenditure, by adding weekly or monthly columns across the top, and suppliers or sub contractors down the side, not forgetting the parasites like bank fees, insurance, legal costs etc. Taking into account payment terms etc and put in the payments when they will need to be made.

Add up the end of each week or month to see outgoings, and run under these an accumulated total.

Income

Do the same for income, will you get stage payments, deposits, or full payments at one time.

Cash flow

The cash flow situation is the accumulated income less the accumulated expenditure, if it runs negative at any point you either need funding i.e. bank loan, or to reschedule your income or payments. Make sure if you are rescheduling payments you have agreements for this or work may stop.

Cash flows are best done on a spreadsheet program like MS Excel, as it does all the calculating for you once you have it set up, and any changes to plan can be seen quickly. It also allows you to model, or play with ideas, to see how the situation would change under different conditions.

Problems

Funding needs and how to cover them economically may present some problems, although with property and only part funding required often the banks will help, at a price. 

Other possibilities are to look at scheduling payments over a longer time for the land, undertaking the development in phases, or developing income producing units ahead of service/social facilities.