Back into the price that hits your return

1 · Learn the move · Cognitive verifier

A seller names a price for 28 acres. A developer who builds to hold should name a return and solve for the land. The shortcut is easy to state: the building's stabilised income divided by your target yield-on-cost gives the total cost the project can carry, and what is left after every non-land cost is the most the land can bear. The trouble is the word 'every'. On an unentitled site, some of the largest costs are not yet knowable, because they sit in conditions nobody has priced and utility letters nobody has read. A cognitive verifier makes the model break the question into its sub-questions before it answers: what target, in what metric, whose NOI, which costs are in the budget, which costs are implied by the record but missing from it. Only then does it do the arithmetic, on your pasted figures, with each line sourced, and it names every unpriced item as a reason the ceiling is lower than it looks. Simple division it can show. The DSCR test on the project's own amortizing loan it cannot, so that check goes to your model. The result is a ceiling to test, never an offer.

Before answering, list the sub-questions you need answered to back into a maximum land price at my target yield-on-cost. Answer each from my documents only, or mark it [NEEDS: ...]. Then do the division and subtraction on my figures, citing each line. List every cost the conditions or utility letters imply that my budget does not carry. Do not attempt the loan's DSCR test. Label the result a ceiling, not an offer. [budget] [NOI build] [hurdle] [conditions]