But I'm kind of getting the sense that it's not all that necessary in this case; it's not a minor blemish but it's not like it's soft and wet.

Returns on new construction are soft, and most value add deals are in the tougher neighborhoods which depress after reno rents.

I've reached out to my personal contacts as it pertains to obtaining LPs and have soft commitments for various projects.

Preliminary history: Land originally bought vacant and with no entitlements for $1,500,000 (free and clear).Entitlement planning costs: $250,000Construction Documents costs: $350,000Total All-In Expenditures so far: $2,100,000 (land + soft costs) After obtaining entitlements and general market appreciation, the value of land is indicated at roughly $2,500,000Basic Rough Math (not actual numbers): Cost of Construction: $10,000,000Market Cost of Land (free and clear): $2,500,000Total Project Cost: $12,500,000Financing Needed: $10,000,000 (assume all FFE, interest reserves, contingencies, hard costs, etc. are included)Financing Assumptions: Loan to Cost: 85% (SBA)Maximum LTC Loan Amount: .85*$12,500,000 = $10,625,000Equity Required: 15% = .15*$12,500,000 = $1,875,000 (Equity in land exceeds this)Actual LTC = $10,000,000/$12,500,000 = 80% Based on early conversations with a lender, they indicated a cash injection would still be required.

Soft costs is normally separated on bids, unless you ask for a turn key, but these calculations should be included in the plans, as it is part of the engineering/architectural scope.One thing that I don't understand is how people arrive at 20% as a GC profit.

You can have "soft contacts" with people where you can evaluate them and they can evaluate you, via text message. 

And at the moment I am building my LP pool and securing soft commitments.

So you're looking at:~$1,500.00/month PITI with 20% down @ 7.6%.(3% of value for taxes)($2,400.00/year for insurance)~$427.00/month repair/capexAfter reno and down payment you'll be ~64,000 all-in (not including other soft costs).So you'll have ~3,500.00/month in gross rents and ~$1990.00/month between Principal, Interest, Taxes, Insurance, Repair and Capex.$1,510/month and making your money back in under 3.5 years isn't too bad.If it still appraises for 142/sqft after 6 months then you could cash out ~38k (75%) (~33k minus closing) and still make ~700.00/month accounting for the increased mortgage and possibly taxes. 

You are missing the hard and soft costs and your profit. 

The Program in Massachusetts (Soft Second Mortgage) will provide a subsidy if your income is below 80% of the area median income.