This 10-min calculation kills 80% of deals before wasting money on architects.

Here’s the formula:

Just saved a client $200K in design fees.

How?
10 minutes. A calculator. Brutal honesty.

Most developers get excited…
And immediately call the architect.

Wrong move.

Here’s the back-of-napkin formula that kills bad deals before they kill you:

Step 1: Land Value Check

→ Land price ÷ buildable square feet

Example:
$500K land ÷ 2,000 buildable sq ft = $250/sq ft land cost

→ If land is over 30% of total project cost per sq ft…

WALK!

Step 2: Construction Cost Reality

→ $300/sq ft minimum for basic construction
→ Add 10-12% for design, permits, engineering
→ Add 3-5% for overhead

Total build cost: ~$350/sq ft or easily over $500 for a downtown highrise.

→ Land + construction should be ≤ 80% of final sale or rental value.

Step 3: The 70-75% Financing Rule

→ Typical loan = 70-75% loan-to-cost
→ You cover the other 25-30% in cash

Quick math:
$1M project = $250K–$300K out of pocket

→ No cash? No deal.

Step 4: The 20% Profit Test

→ After all costs, demand 20% minimum profit

Why?
Because something always goes sideways.
Permits. Costs. Markets.

If it barely works on paper, it won’t work in real life.

Real Example:

Land: $500K
Buildable: 2,000 sq ft
Construction: $350 x 2,000 = $700K

Total cost: $1.2M

→ You need a sale price of $1.44M ($720/sq ft) to hit margin.

Can the market support $720/sq ft?
If not — walk away.

This math takes 10 minutes.
It saves you 6 months and $200K in soft costs.

I’ve seen developers spend $50K on plans for projects that never penciled — not even on Day 1.

Do the math first. Get excited later.

The deals that survive this test?
Those are the ones worth building.