Explanation of  how Lead Developer uses coded iterative calculations to calculate finance costs

This section explains how Lead Developer uses coded iterative calculations to calculate finance costs. This section also explains the last four cost heads in the Finance sheet that are TOTAL DEVELOPMENT COSTS(Excl. Principal, Extra Pmts. & Taxes), DEVELOPMENT REVENUE (GROSS SALES Less Agents Comm. @ Settlement), OTHER INCOME, and TOTAL PROFIT (LEVERED FREE CASHFLOW) - PROJECT.

Last Four Cost Heads In Finance Sheet

This section helps you collate all the data including costs incurred,  interest costs and see if you are making profit out of this development project.

The four sections are explained below:

1. TOTAL DEVELOPMENT COSTS(Excl. Principal, Extra Pmts. & Taxes): This refers to the total cost for the entire development project barring the principal amount, any extra payments made, and all taxes that you have paid in the development.

2. DEVELOPMENT REVENUE (GROSS SALES Less Agents Comm. @ Settlement): This refers to the income generated from the development, i.e. the gross sales amount excluding any agents’ commission paid.

3. OTHER INCOME: This refers to any other income that is coming into the project.

4. TOTAL PROFIT (LEVERED FREE CASHFLOW) - PROJECT: This refers to the total profit earned by the project.

ITER - Total Profit

You can notice that it is OK for the fields TOTAL DEVELOPMENT COSTS(Excl. Principal, Extra Pmts. & Taxes), DEVELOPMENT REVENUE (GROSS SALES Less Agents Comm. @ Settlement), and OTHER INCOME. 

However for the field TOTAL PROFIT (LEVERED FREE CASHFLOW) - PROJECT it is displayed as ITER. This means that it is constantly going into a loop and that is why the totals are not matching exactly. You should note that they will never match.

In the Funding Table, the interest is picked up and added at the end because you need to be able to get your interest costs allocated in the project as part of the total development cost. 

The Funding Table does not have mezzanine loan and developer’s equity. This is because you do not really need to add that to the TDC. The TDC is for you to see the bottom line but the bank does not use the interest in the mezzanine loan and developer’s equity sections to calculate the total development cost. So all the calculations will go into a loop 50 times to get the most probable value and hence ITER is displayed in the TOTAL PROFIT (LEVERED FREE CASHFLOW) - PROJECT field.

Interest In Funding Table

In the FUNDING TABLE section, there is an option called Valuation. Let us consider a scenario to explain this option. For example your land you might have bought the land for 1.2 million dollars but the valuation of your land came in lower. In that case you would have to enter the values in the LAND FINANCE section. To avoid this double work, you can use the Valuation option. 

1. Enter the valuation amount under the Valuation column. 

2. Select Yes in the Update Land Finance Based On Valuation dropdown list.

3. Click Save and Refresh.

If your land valuation comes less it means that you will need to come up with more capital in order to purchase the land because the bank will only lend you based on that valuation.

All the calculations will be redone.

Pay Out Loan Balance in Land Finance

4. Delete the Pay Out Loan Balance field values in LAND FINANCE and LAND LOAN REFINANCE sections.

5. Click Save and Refresh.

The error will be cleared, the totals will be balanced, and the extra equity that you have to come up with in order to settle on this block of land would be added to your developer’s equity contribution.


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