Developers: How Do You Guys Make So Much Money?

[Jim Macedon]

I put a piece of land under option and went through the whole process of getting quotes for everything for a 36 unit condo project.  Below are the numbers I came up with.  I have no idea how to make money in development now.  What am I doing wrong? (Sorry, I'm sure the formatting will get screwed up when I copy and paste this.)

Costs
Costs that can be financed
43200	x	$140	=	$6,048,000	building costs
			$75,000	pool
			$150,000	site work
			$85,000	land
			$10,000	design fees
			$60,000	civil engineering
			$5,000	legal fees (condo incorporation)
			$100,000	developer fees
			$288,000	commissions and closing costs
			$7,000	web design
			$6,828,000	total financiable costs
Costs that cannot be financed
			$1,092,480	closing and interest costs
Total cost
			$8,208,480	total costs
Total cash cost
$6,828,000	x	0.2	=	$1,365,600	down payment on construction loan
			$1,092,480	closing and interest costs
			$2,458,080	total cash cost
Revenue, Profit, and ROI
			$200,000	estimated sales price per unit
36	x	$200,000	=	$7,200,000	revenue
$7,200,000	-	$8,208,480	=	($1,008,480)	profit
($1,008,480)	/	$2,458,080	=	-41.03%	ROI

[Nik Moushon]

I dont know where you got your design fee from but it is WAY underpriced. Architecture fees alone ar going to run you 5-10% on construction cost. So based off you 6 mil price thats $30-60k. I also dont see any permit fees, which is going to be in the 5 digits as well, unless this is in your developer fees...which im not sure what those are exactly. 

One thing to note, I'm assuming you paid all cash for the land, you can use the land value as a down payment for the construction loan.