Strategy — Ground-Up Development
Underwrite new construction without burying soft costs
Most ground-up underwriting fails on soft costs and carry. DealForge breaks land basis, hard costs, soft costs, and interest reserve into separate inputs so the all-in number is honest before you put dirt under contract.
- Separate inputs for land, hard cost, soft cost
- Construction draw schedule with interest reserve
- LTC and LTV financing modeling
- New-construction exit comps
- Build-to-sell and build-to-rent exits side-by-side
- Permit-timeline tracker on the project board
What it is
Ground-up development is the highest-margin and highest-risk single-family strategy. The deals that work treat permitting, design, and carry as first-class line items — not afterthoughts. DealForge structures the underwriting that way and carries the same structure through the construction phase via the project module.
Who it's for
Infill developers
Single-family new builds in established neighborhoods.
Small-multifamily builders
Duplex to fourplex construction in walkable markets.
Build-to-rent investors
Holding new construction as long-term rentals.
Land flippers leveling up
Adding entitlement and vertical to your existing playbook.
How it works
- Step 1
Underwrite the land basis
Purchase + closing + due diligence + entitlement costs.
- Step 2
Build the hard-cost budget
Trade-level or $/sqft, with contingency.
- Step 3
Layer soft costs and carry
Design, permits, fees, interest reserve, insurance.
- Step 4
Pick the exit
Build-to-sell, build-to-rent, or hybrid; both modeled.
- Step 5
Track to completion
Permits, inspections, draws, and ledger in the project module.
Cost categories that kill deals
| Category | Often missed? | DealForge default |
|---|---|---|
| Land carry during entitlement | Yes | Modeled in months |
| Impact and tap fees | Yes | Soft-cost line item |
| Interest reserve | Yes | Built from draw schedule |
| Sales commissions on resale | Sometimes | Auto-deducted from gross |
Ground-up ROI calculator
Estimate developer profit, margin on revenue, and return on total cost.
Default expense, tax & vacancy assumptionsClick to expand — every default is editable and feeds back into the numbers above.ShowHide
Default 10% · at default
Multiplied onto hard costs. First-time developers should run 15%; established crews can hold 8%.
Default $8,000 · at default
Local fees vary wildly — some metros charge $25k+ per new SFR. Always quote your jurisdiction up front.
Default $3,500 · at default
Covers the structure during construction. Premium scales with build duration and replacement cost.
Estimates only. DealForge models every line item — taxes, insurance, vacancy, capex, financing fees — when you run the full analyzer.
Inputs, assumptions & how to read the results
What each field means, the math we apply, and what counts as a healthy number.
What belongs in 'land basis'?
Purchase price + closing + due diligence + survey + any entitlement or rezoning costs. If you bought the lot a year ago, also include carry during entitlement.
Hard costs vs soft costs?
Hard costs are physical construction: foundation, framing, MEP, finishes. Soft costs are architectural design, engineering, permits, impact and tap fees, and construction-period insurance.
How do I estimate interest carry?
Average outstanding loan balance × rate × construction months. A rough shortcut: (Hard + Soft) ÷ 2 × rate × (months ÷ 12).
What is 'margin on revenue'?
Developer profit ÷ exit value. Lenders typically want ≥15% margin on revenue; below 10% means a small cost overrun wipes the project out.
What is 'return on cost'?
Developer profit ÷ total cost. 20%+ is healthy for small infill; 15% is acceptable on lower-risk build-to-rent.
What's in the assumptions panel?
The line items most often missed in a back-of-napkin pro forma — hard-cost contingency, permit/impact fees, and builder's-risk insurance. All three feed total cost.
Frequently asked questions
What is ground-up development?
Building a new structure from raw or scraped land, then either selling for profit (build-to-sell) or holding as a rental (build-to-rent). Costs are split into land basis, hard costs (sticks-and-bricks), and soft costs (permits, design, financing, carry).
How does development underwriting differ from a flip?
Flips renovate existing structures; development creates them. The risk profile is longer (12–24 months vs 6–9), the permitting path matters as much as the construction, and the exit comps are new-construction comps — not the renovated existing-stock comps a flip uses.
What are hard costs vs soft costs?
Hard costs are physical construction — foundation, framing, MEP, finishes. Soft costs are everything else: architectural design, engineering, permits, impact fees, financing fees, construction-period taxes and insurance, and interest carry.
What financing do developers use?
Construction loans funded in draws, often 80% LTC (loan-to-cost) for experienced developers, paired with equity from the sponsor or LPs. DealForge models LTC, draw schedules, and interest reserve directly in the analyzer.
Is DealForge built for large multifamily development?
DealForge is currently optimized for small infill — single-family new construction, duplex-to-fourplex, and small build-to-rent portfolios. Large multifamily ground-up has additional capital-stack and stabilization modeling that we'll address in a future release.
Related features
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