The Fields Proforma

1. Project Overview

  • Location: Bastrop, Texas

  • Land Size: ~25 acres

  • Development: 8 Luxury Homes + 1 Amenity Center

  • Average Size per Home: 3,500 sq. ft. (Conditioned)

  • Amenity Center Size: 3,500 sq. ft. (Conditioned)

2. Financial Summary

A. Revenue Analysis

  • Selling Price per Sq. Ft.: $1,100

  • Total Selling Price per Home: $3,850,000

  • Total Revenue from Sales: $30,800,000

B. Cost Analysis

  • Land Acquisition: $2,500,000

  • Building Cost per Sq. Ft.: $500

  • Total Construction Area: 31,500 sq. ft. (28,000 for homes + 3,500 for amenity center)

  • Total Building Cost: $15,750,000 

  • Site Development: $630,000 (4% of Building Cost)

  • Engineering and Landscape Design: $551,250 (3.5% of Building Cost)

  • Developer and Architect Fee: $1,417,500 (9% of Building Cost)

  • Permitting: $47,750 (0.3% of Building Cost)

  • Contingency: $1,575,000 (10% of Building Cost)

  • Realtor Fee: $831,600 (2.7% of Home Sales Price)

  • Total Project Cost (not including loan interest): $23,303,100

C. Financing Structure

  • Investor Funding: The project is funded with a combination of debt & equity. The bank will finance 40% of the Total Project Cost at 7% interest. The remaining 60% of the Total Project Cost will come from equity investors.

  • Investment Terms: Investors may have different terms based on their agreement. This could include a fixed percentage return, profit-sharing, or a combination of both.

  • Capital Distribution: Initial capital will be distributed across the project timeline as per construction and development needs.

  • Return of Capital: Investors' capital will be returned from the sales revenue of the homes, prioritizing the return of principal before profit distribution.

  • Profit Distribution: After the return of the initial investment, the remaining profits will be distributed among investors. This could be proportional to their investment contribution or as per a pre-agreed formula.

  • Exit Strategy: The project is expected to conclude in 4 years, at which point all homes are to be sold, and returns fully distributed.

  • Risk Mitigation: Measures such as pre-sales agreements can be used to reduce financial risks to investors.

D. Revenue Schedule

  • Year 1: 20% downpayment for 50% of homes.

  • Year 2: 20% downpayment for remaining 50% of homes.

  • Year 4: Remaining 80% of selling price for all homes

3. Cash Flow Projection

  • Year 1: Net Cash Flow = -$7,180,000

    • Expenses:

      • Land Acquisition: $2,500,000

      • Site Development: $630,000 (4% of Building Cost)

      • Permitting: $47,750 (0.3% of Building Cost)

      • 1/3 of Total Building Cost: $5,250,000

      • 1/3 of Engineering and Landscape Design: $183,750

      • 1/3 of Developer and Architect Fee: $472,500

      • 1/3 of Contingency: $525,000

      • Loan Interest: $651,000

    • Income:

      • 20% downpayment from 50% of homes: $3,080,000

  • Year 2: Net Cash Flow = -$4,002,250

    • Expenses:

      • 1/3 of Total Building Cost: $5,250,000

      • 1/3 of Engineering and Landscape Design: $183,750

      • 1/3 of Developer and Architect Fee: $472,500

      • 1/3 of Contingency: $525,000

      • Loan Interest: $651,000

    • Income:

      • 20% downpayment from 50% of homes: $3,080,000

  • Year 3: Net Cash Flow = -$7,082,250

    • Expenses:

      • 1/3 of Total Building Cost: $5,250,000

      • 1/3 of Engineering and Landscape Design: $183,750

      • 1/3 of Developer and Architect Fee: $472,500

      • 1/3 of Contingency: $525,000

      • Loan Interest: $651,000

  • Year 4: Net Cash Flow = +$23,157,400

    • Expenses:

      • Realtor Fee: $831,600 (2.7% of Home Sales Price)

      • Loan Interest: $651,000

    • Income:

      • Revenue from Home Sales: $24,640,000 (80% of total revenue from sales)

4. Profitability Analysis

  • Total Profit: $4,892,900

  • Profit Margin: 11.35%

  • Equity Multiplier: 2.2

  • IRR: 12.272%

  • Break-even Selling Price per Sq. Ft.: Approximately $832.25

5. Marketing Strategy

  • Sales Approach: Direct sales with listings on multiple Mortgage Listing Services (MLS) for a low flat fee, bypassing traditional real estate agents.

  • Virtual Reality (VR) Representation: Cutting-edge VR technology will be used to represent the homes, aiming to facilitate 100% pre-sales before project completion in Year 4.

  • Cost Savings: The use of VR and MLS listings is anticipated to result in substantial savings in marketing and sales commissions.

  • Target Market: Focused on buyers interested in off-grid capable, regenerative luxury homes, leveraging VR technology to provide an immersive, interactive property viewing experience.

  • Pre-Sales Goal: To secure sales agreements for all homes before the completion of construction, thereby reducing financial risks and ensuring steady cash flow.

6. Risk Assessment

  • Market Risk: Changes in real estate market conditions could affect selling prices and demand.

  • Construction Risk: Delays, cost overruns, and unforeseen construction issues.

  • Regulatory Risk: Changes in zoning laws, building codes, or permit delays.

  • Technology Risk: Dependence on VR technology for pre-sales, which may not appeal to all buyers.

  • Sales Risk: Reliance on achieving pre-sales targets and the effectiveness of the marketing strategy.

7. Investor Return Analysis

  • Projected Returns: Investors are projected to receive the total project profit of $7,496,900 at the end of the 4-year period, equating to an ROI of approximately 32.17%

  • Profit Distribution: The profit will be distributed among investors based on their share of the initial investment.

  • Attractiveness: The project offers a substantial ROI, but investors should consider the associated risks, particularly the reliance on pre-sales and market conditions with regards to annualized ROI

Conclusion

This scenario provides a moderate-value opportunity with projected ROI of 32.17%. The model has conservative assumptions. The cost in construction price per square foot also does not include a potential reduction in cost (compared to the 6 home, non-amenity center model) from an increased economy of scale.  There are conservative estimates for the soft costs of the project, in particular, the high permitting fees and the assumption that the entire 10% contingency will be used.  The model also includes covering the cost of buyer’s realtor fees, increasing the attractiveness of the final sale price compared to other properties - though we are interested in strategies that sell directly to consumers, which would allow us to return the 2.7% realtor fees to the investor. The use of VR technology and direct sales strategy aims to minimize marketing costs and secure pre-sales.  However, the project carries risks, including market volatility, construction challenges, the efficacy of its technology-reliant sales approach, and the lack of comparable investment properties.   Investors should weigh these factors against the potential returns and the project's structured financial plan. The annualized ROI hinges significantly on achieving pre-sales goals, managing construction effectively, and navigating market conditions over the 4-year timeline.