The financial analysis of any real estate development project is generally considered “the meat of the story”.  Like most books, you have one chance to grip your reader.  However, unlike a novel, the financial analysis needs to be complete with mathematics that are true and correct.  The structure of the analysis is the backbone or foundation  – beneath the surface, it holds everything together and imposes order on the flow.  Without a coherent and logical structure to the analysis, the analysis will be unclear.

The financial analysis is typically a report forecasting income, expenses and expected returns associated with a real estate project. The cash flows are projected for a period of time through study, research, analysis, and experience although there maybe some “crystal balling”. The analysis is prepared for a variety of purposes but mostly to attract capital (debt and equity) to a specific project.  The pro forma will be evaluated by potential equity partners and lenders. As a result, the information included in the pro forma is required to be verifiable and reliable.  Most importantly, the mathematics must be correct.

This article will provide you with information to prepare a land development financial analysis and cash flow pro forma and provides a case study as an illustration to the concepts, formulas, and referencing needed for a dynamic model capable of providing sensitivity to a variety of inputs.

Preparing the Land Development Pro Forma + LDA Pro forma 12102016