What is the percentage return on total cost

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Question - The investor-developer would not be comfortable with a 7.8 percent return on cost because the margin for error is too risky. If construction costs are higher or rents are lower than anticipated, the project may not be feasible. The asking price of the project is $3,700,000 and the construction cost per unit is $80,200. The current rent to justify the land acqusition is $1.2 per square foot.

Required -

a. Based on the fact that the project appears to have 9,360 square feet of surface area in excess of zoning requirements, the developer could make an argument to the planning department for an additional 10 units, 250 units in total, or 25 units per acre. What is the percentage return on total cost under the revised proposal? Is the revised proposal financially feasible?

b. Suppose the developer could build a 240-unit luxury apartment complex with a cost of $87,500 per unit. What would such a project have to rent for (per square foot) to make an 8 percent return on total cost?

Reference no: EM133078462

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