How to guide
to real estate
promotion
Real estate promotion, despite being
technical, is within the reach of most
professionals and those with a few funds
and a spirit of enterprise.
Here are the key stages to follow to succeed
in such an endeavour.
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The market
Market study is vital. It allows for the
determination of the sale price per m2
in the sector, the types of products to
be made (studio, 1 bedroom, 2 bedrooms,
...) and the customer profile
(holiday home, main home, foreigners,
locals, investors, ...).
To survey the current operations
under construction and to take information
from real estate agents on resales
and demands will help in the
completion of the study.
Financial balance sheet
It is the corner stone of a real estate
venture. It serves as a dashboard
throughout the process. Here is how it
is made. :
- Once the balance sheet is made, it
must enable the promoter to appreciate
the quality of the venture, and more
specifically the following points: the
land must represent between 28%
and 35% of the operation cost. This
ratio varies depending on the quality of
the area in which it is located.
- For the building cost (construction
work + connexion utilities + development)
estimate between 1300 and
1500 € all exclusive per m2 net floor
area for a quality but not luxury building.
- The net margin must represent more
or less the value of the land.
- The management and commercialisation
fees despite being written in the
costs can be met by the promoter and
therefore can be added to the profit margin if he/she assumes himself /
herself the management and commercialisation
of the programme.
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Example of a forecasted balance sheet on a project currently being
built
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An 18 units building on the Côte d'Azur.
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Net floor area 1380
m2 / Habitable area: 1100 m2
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SECTIONS
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FORECASTED
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REAL ALL
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OBSERVATIONS
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ALL EXCLUSIVE
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EXCLUSIVE
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Land purchase
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1 000 000
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Commissions
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32 000
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Notary fees
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30 000
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Land surveyor fees
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4 000
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Geological scientist fees
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4 000
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Equipment local tax
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35 000
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Sanitary connexion tax
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22 000
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Building
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1 830 000
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Connexion utilities
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100 000
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Landscaping gardens and commons
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50 000
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Various building works
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10 000
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Project manager
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160 000
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Control office
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20 000
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Site safety and security
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9 000
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Reinforced concrete engineer
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4 000
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Damage and work insurance
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60 000
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Financial costs
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40 000
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Guarantee of completion
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20 000
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Sale office and advertissement
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40 000
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Management fees
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120 000
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Miscelaneous
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10 000
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Sales fees 5% of the selling price
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252 900
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Total cost all exclusive
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3 852 900
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e
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Selling price
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5 058 000
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e
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Net profit margin
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1 205 100
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e
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Exemple d'un
bilan prévisionnel sur une opération en cours
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d'instruction
d'un immeuble de 18 logements sur la Côte d'Azur
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Surface hors oeuvre
net (SHON) : 1380 m2
/ Surface habitable : 1100
m2
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RUBRIQUES
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PREVU HT
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REALISE HT
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OBSERVATIONS
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Achat terrain
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1 000 000
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Commissions
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32 000
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Frais de notaire
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30 000
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Honoraires géomètre
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4 000
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Honoraires géologue
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4 000
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Taxes locales
équipement
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35 000
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Taxes raccordement
égout
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22 000
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Construction
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1 830 000
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VRD
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100 000
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Aménagements jardins
et communs
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50 000
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Divers constructions
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10 000
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Maître d'oeuvre
(archi, BET)
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160 000
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Bureau de contrôle
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20 000
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SPS (sécurité
chantier)
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9 000
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Ingénieur béton armé
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4 000
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Assurance dommage
ouvrage
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60 000
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Frais financiers
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40 000
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Garantie
d'achèvement
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20 000
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Bureau de vente et
publicités
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40 000
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Honoraires de
gestion
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120 000
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divers et imprévus
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10 000
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Honoraires de vente
5% du prix de vente
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252 900
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Total prix de
revient HT
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3 852 900
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€
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Prix de vente
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5 058 000
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€
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Marge nette
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1 205 100
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€
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The figures written in the balance
sheet are mostly provisional and they
will be adjusted throughout the progression
of the programme.
It is nonetheless important to maintain
the previously mentioned balances to
preserve profitability.
This balance sheet, which must be
provided to the bank if it is to finance
this project, allows the personal
investments to be defined. Generally, it
is around 10% of the operation cost
or 385,290 e in the example presented
above + a reservation percentage which
the bank will define.
Le chantier / la livraison
It is the most sensitive and the riskiest
phase.
Poor site management and slap
dashed deliveries can put at risk the
most beautiful project. Which is why it
is vital to select an architect accustomed
to manage building contractors
and who will ensure weekly meetings
on site with the promoters. These meetings
are essential, no absence must
be tolerated and the problems noted
must be solved in due time so as not
to hamper the proper progress of the
project. It is advised in the final phase
(between 1 and 2 months before final
delivery) to visit the site daily so as to
reduce as much as possible the potential
reserves on the product delivery
date.
There must be no laxity until delivery:
it is the golden rule.
To conclude, a properly managed real
estate promotion will bring interest,
satisfaction and especially an exceptional
profitability in relation to the
invested capital.
In this case, 385,290 € invested for a
1,205,100 € margin over 2 years or
around 312%. Who can do better?
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