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87 <br />What is a proforma? <br />A proforma is a tool used to present financial informa- <br />tion for a specific project (at a specific time). It is used <br />to calculate costs and revenue related to a project. <br />Using these calculations decision makers - including <br />investors and banks - can determine if they wish to <br />move forward with a project. <br />To the right is a sample proforma for building a staked <br />duplex on a 30’ wide lot where both units would be <br />rental. Provided are notes to help explain how the <br />figures were calculated and what they tells the user. <br />Proformas Duplex - Owner Occupied (30' Lot) <br />Residential 2 Units - Owner Occupied with Rental Unit - New Construction <br />Notes on Terms and Assumptions <br />Residential Unit Rents Rent SF Rent per <br />SF Units Total Rent Total SF <br />2 Bedroom, 2 Bathrooms $925 800 $1.16 2 $1,850 1,600 Selected Program of Units - Stacked Duplex <br />Total Residential 2 $1,850 1,600 Research Area Rents and talk to local brokers or building owners to determine appropriate rental rates. <br />Non Rented Space <br />Porch 50 1 50 <br />Total Non Rented Space 50 <br />Total Monthly Rent $1,850 <br />Total Building Square Feet 1,650 <br />Site Information <br />Lot Size 3,780 <br />Building Footprint (Ground Floor SF)22%850 Area of building that touches the ground <br />Site Area Net of Buildings 2,930 Used as Input to Site Improvements SF under COSTS <br />Residential Unit Income Percent of <br />Income Income <br />Gross Potential Income (Total Annual Rents)$22,200 Total Monthly rents X 12 months. <br />Less Vacancy 5%-$1,110 You need to account for some vacancy or turnover. Use a vacancy rate that is currently and historically found in the market. <br />Gross Operating Income $21,090 <br />Operating Expenses 15%-$3,164 This is a ballpark estimate which should be verified through a detailed budget. <br />Net Operating Income (NOI)$17,927 Net Operating Income (NOI) is the Cash flow after Expenses. It is used to determine the value of an asset. <br />Residential Unit Cost Percent Cost per SF Cost <br />Building Hard Cost SF Building $125 $206,250 Hard Costs are Direct Construction Costs for labor and materials to build the building <br />Site Improvements SF Site $1 $2,930 Costs for horizontal construction, landscaping, etc <br />Connection Fees / Utility Installation Costs $12,468 Connection Fees + Installation Labor Costs for 6" Sanitary and 1" Water Lateral in one trench, with surface repair <br />Total Hard Costs $221,648 <br />Soft Costs 20%$44,330 Calculated off the Hard Costs and Site Improvements, not offsite improvements/impact fees <br />Land / Acquisition Costs $500 <br />Total Project Costs $266,478 <br />Total Cost Per Residential Unit $133,239 Total Building Basis is the amount of dollars into the investment including acquisition and construction either per unit or PSF. <br />Return on Project Cost 6.7% <br />Return on Cost is a measurement of the Risk of a project. It the projected cash flow divided by the upfront cost is too low <br />versus the expected exit cap, then the project is not a great investment. <br />Loan Information Term <br />Years <br />Interest <br />Rate <br />Amort <br />Years % Down Cost <br />Down Payment 25%$66,619 Amount of Cash and/or Money used in the project via Qualified Expenses needed to close on the construction loan. <br />Loan Amount $199,858 Loan to Cost (LTC) <br />Loan Assumptions 3 5.0%25 <br />Amortization is the number of years over which the loan could be paid off in equal installments. (It is not the same as the term <br />of the loan). Term is the length of time to either pay back the loan or refinance or sell. <br />Monthly Debt Service -$1,168 <br />Total Annual Debt Service -$14,020 <br />Cash Flow After Debt Service $3,906 Annual NOI less Annual Debt Service <br />Debt Service Coverage Ratio (DSCR)1.28 Debt Coverge Ratio: NOI / Debt Service. Lenders often require 1.25 DSCR or higher, depending on risk. <br />Cash on Cash Return (Return on Down Payment)5.9%Annual Cash Flow after Debt Service divided by Equity (down payment) <br />Value Per Acre $2,554,229 <br />Property Value divided by Acreage, used as a measure of tax base productivty. Calculated by creating an estimate of <br />assessed value by taking fraction of Hard Costs and dividing by the lot size expressed in acres. <br />BUILDING PROGRAM AND RENTS <br />INCOME <br />COSTS <br />CONSTRUCTION LOAN <br />Blue cells are INPUTS <br />Gray cells are CALCULATED