Develop and Design your project with a 360 degree Approach
August 26, 2019
Real Estate 101 – the financial proforma
How to marry reason to your passion
We get it – you have a vision for your real estate development and you’re passionate about your project. Part of illustrating your vision and attracting others to share it is proving the financial viability and return on your investment. The tool required to prove your vision is a financial report called a proforma.
Before you fork over your hard-earned money on a piece of property, “bargain” or not, investing in a proforma will ensure you’re able to bring your vision to life and see a return on your investment. For a first-time commercial real estate investor, not having a proforma is the equivalent of getting a home mortgage without first receiving an appraisal and comparable selling prices for your property.
A proforma is a set of calculations that project the financial return a proposed real estate investment is likely to create. It is based on equity and debt financing, costs associated with planning, construction and operations, and revenue from projected rents the property will generate. Further, the proforma can help determine the type of building use, commercial, retail, multi-family, etc. that will generate the highest return on the investment; it validates your vision for the property with verifiable and reliable financial returns.
In order to attract other equity investors and debt to finance the project i.e. banks – having a proforma is a must. It is relied upon by both equity partners and banks as verifiable evidence of a return on the investment. A project cannot move forward on debt without one.
The proforma enables a development and design partner like DSGNworks to gain a holistic understanding of the project’s goal. It helps establish financially the most lucrative option for the property. Combined with a unique understanding of how to weave the many threads together – the design, construction schedule, business model, and budget – the proforma provides DSGNworks a critical ingredient to bring your vision to life.
At DSGNworks, we focus on helping you develop the highest and best use for your property investment, because design works when investment, vision and passion create value.
