Anyone in property development knows that there are many moving parts when it comes to keeping track of finances. In addition to materials and labor, there are also land acquisition costs, marketing expenses, permit fees, and more. To ensure your development project stays on track—and doesn’t break the bank—it’s important to have a handle on all the different accounting considerations. Let’s take a closer look at some of the key things to keep in mind.
Preliminary Expenses
When you first start planning a development project, your preliminary expenses can add up quickly. These include feasibility studies, site selection and due diligence, land surveying and environmental assessment, and architectural and engineering fees. To get a better sense of these costs early on, it’s helpful to put together a detailed budget. This will give you a clear picture of what you need for financing, and will also help you keep track of expenses in the future.
Hard Costs
Once you’ve completed the preliminary phase of your project, it’s time to start incurring hard costs. These are costs associated with building construction and site infrastructure. Hard costs can include everything from excavation and grading to concrete work and framing. In addition, if you’re planning any special features or amenities in your development (eg. A swimming pool or gym), those will also incur additional hard costs. It’s important to track all your hard costs carefully so that you can stay on budget.
Soft Costs
Soft costs include items like professional fees (for architects, engineers, and consultants), permits and impact fees, title insurance, and marketing expenses. These are often recurring, and can be easy to overlook if you’re not keeping careful track. Be sure to build soft cost considerations into your overall budget from the start, so that there are no nasty surprises later down the line.
As you can see, there are a lot of different accounting considerations to keep in mind when embarking on a new project, with many different line items that can impact your bottom line. By being mindful of these different cost categories—and tracking them carefully—you can ensure that your development project stays on budget and on track. Sing out for any questions!
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