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Commercial Real Estate FAQ With Stephen Epstein On Real Estate Development & Investments

What Financial Metrics Are Key When Managing Real Estate Development Projects?

The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.

When you’re managing a real estate development project, the most important metric to pay attention to is your budget compared to your time. If you notice your project going too long, and the budget is drying up, you might be losing out on more than you realize. If you’re estimated to be around 80% finished with the project, your budget should match with that 80% mark. 

What financial metrics are key when managing real estate development projects? So, the financial metrics that are most important when you are doing a construction project would really have to do with budget compared to time. Where are you on the schedule, on the project schedule, compared to where are you on the project budget. You should know, you know, that if you’re 80% complete with your project, then you should be about 80% of the money spent. Presuming that it kind of flows that way, right? There’s exceptions, but if you said you were going to be out of the ground in January, but you’re out of the ground in June, you’re 6 months behind, that’s going to cost you tons of money in lost interest, in bank interest that’s going to accrue, and lost revenue in terms of leases, and you may miss the market, you may miss the school season if you’re student housing – who knows what, right? So it’s very very important that the schedule and the budget are managed very very carefully from start to finish in a real estate development project. 

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Richard Wilson

Richard Wilson

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