LDM Input Page - A Tutorial
This
is the "look and feel" of the model's input page (scroll down).
It
is the one
and only page where data is entered - that is unless you choose
to use the take
off
page
to pencil in some field notes before going digital. Links
are
used to jump around the website to describe and illustrate how
the
model works, so use your browser's back button.
Data entry is really very easy. A couple times through and you will have it, we promise! The input page is the one and only page for data entry? More specifically, the input column is the one and only column that data is entered. Go ahead and scroll down this column on the webpage - the white fields are the entry points.
The land development components such as number of phases, number of lots, average sale price of lots, and so on down the line are displayed in the second column of the input page. The components are categorized under headings such as lots and phases, land cost, timing of land purchases, options, and project type. See list of components.
The prompt column is where directing, correcting, and model consistency prompts assist you in the data entry process. For instance, note that line 8 in the prompt column (a correcting prompt) indicates '< OK'. This is because line 4 and line 8 of the input column are equal, or consistent. Had they not been, the prompt would have been '< Error, lines 4 and 8 must be equal'. Click here to see how prompts direct data input and alert you to entry errors and model inconsistencies.
The output tables and schedules column is where you navigate to model results such as annual profit and cash flow tables, a project summary table, a profit by phase table, etc. Simply click on the output you wish to see and you will be there. Click to go to the model output page.
There are three field-clearing macros and one auto-entry macro incorporated to the input page. Although it is not mandatory to enable them, they make data entry easier and more efficient. One of the field-clearing macros clears all model input with one click on the clear all variables button. Another clears absorption and interest rate entries, thereby enhancing 'what-if' analysis. The third one clears entries for total acres and acres per phase. Finally, the auto-entry macro inserts the four typical lender requirements to the model. Of course you can manually alter these auto entries, depending on actual lender requirements. One thing we assure you, the convenience of the macros will become self-evident as you conduct 'what-if' analysis on the many land development components and begin to routinely save various project scenarios.
Data entry is really very easy. A couple times through and you will have it, we promise! The input page is the one and only page for data entry? More specifically, the input column is the one and only column that data is entered. Go ahead and scroll down this column on the webpage - the white fields are the entry points.
The land development components such as number of phases, number of lots, average sale price of lots, and so on down the line are displayed in the second column of the input page. The components are categorized under headings such as lots and phases, land cost, timing of land purchases, options, and project type. See list of components.
The prompt column is where directing, correcting, and model consistency prompts assist you in the data entry process. For instance, note that line 8 in the prompt column (a correcting prompt) indicates '< OK'. This is because line 4 and line 8 of the input column are equal, or consistent. Had they not been, the prompt would have been '< Error, lines 4 and 8 must be equal'. Click here to see how prompts direct data input and alert you to entry errors and model inconsistencies.
The output tables and schedules column is where you navigate to model results such as annual profit and cash flow tables, a project summary table, a profit by phase table, etc. Simply click on the output you wish to see and you will be there. Click to go to the model output page.
There are three field-clearing macros and one auto-entry macro incorporated to the input page. Although it is not mandatory to enable them, they make data entry easier and more efficient. One of the field-clearing macros clears all model input with one click on the clear all variables button. Another clears absorption and interest rate entries, thereby enhancing 'what-if' analysis. The third one clears entries for total acres and acres per phase. Finally, the auto-entry macro inserts the four typical lender requirements to the model. Of course you can manually alter these auto entries, depending on actual lender requirements. One thing we assure you, the convenience of the macros will become self-evident as you conduct 'what-if' analysis on the many land development components and begin to routinely save various project scenarios.
Project Type
The model allows for analysis of one, two, or three phases, as well as the analysis of land options. Of course the land purchased for a one phase project cannot be optioned. If you are considering a two phase project, the land for both phases can be purchased at once (such as the sample here, 2 Phase - No Option), or an option can be negotiated for the phase two land. A three phase project has four possible land purchase possibilities. A drop down menu with the seven project types is provided on line 10 of the model. Click for a discussion of project types.
Scroll down to view other sections of the input page.
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Model Input Page
| Land Development Component Column | Input Column | Prompt Column | Output Tables & Schedules Column | |||||
| Line # | Identification & Date | Use Tab Key | To Bottom | Annual Profit Table | ||||
| 1 | Name of Project | Oak Hollow | < Enter Project Name | Annual Cash Flow Table | ||||
| 2 | Entry Date | 7/1/2009 | < Enter Date | |||||
| Project Summary Table | ||||||||
| Lots & Phases | ||||||||
| Profit By Phase | ||||||||
| 3 | # of Phases | 2 | < Enter 1, 2 or 3 | |||||
| 4 | Total # of Lots | 83 | < Enter Total # of Lots, All Phases | Lot Sale Schedule | ||||
| 5 | # of Lots in Ph 1 | 38 | < Enter # of Lots Ph 1 | Key Variables | ||||
| 6 | # of Lots in Ph 2 | 45 | < Enter # of Lots Ph 2 | |||||
| 7 | # of Lots in Ph 3 | < Make No Entry | Cash Inflow & Loan Reduction |
|||||
| 8 | Total # of Lots | 83 | < OK | |||||
| Interest Calculation | ||||||||
| Land Cost, Timing of Land Purchases, Options & Project Type | Clear
All Variables Button |
Takeoff Page | ||||||
| 9 | Total Land Cost, All Phases | $1,500,000 | < Enter Total Land Cost, All Phases | |||||
| 10 | Project Type | 2 Phase - No Option | < Enter Project Type | |||||
| 11 | Project Type ID | 4 | < OK | |||||
Profit
Measures & Ratios on LDM Input Page
Take a look
at the profit
summary section and the ratios and measures section
on the right hand column of the input page. These
sections are in easy
eyeshot of the input column, allowing you to track the impact
on revenue, cost of goods sold, interest, profitability,
etc., as changes are made to land
development
components. Of course these measures, and many more, are
displayed on
the model's output pages, but also here, on the fly
so to
speak!
Scroll down to view other sections of the input page.
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| Line # | Estimated Sale Price of Lots By Phase | Input Column | Prompt Column | Profit Summary | ||||
| Gross Revenue | $6,085,000 | |||||||
| 12 | Ave SP of Ph 1 Lots | $72,500 | < Enter Ave SP Ph 1 | Sales/Closing Costs | $ 243,400 | |||
| 13 | Ave SP of Ph 2 Lots | $74,000 | < Enter Ave SP Ph 2 | Net Revenue | $5,841,600 | |||
| 14 | Ave SP of Ph 3 Lots | < Make No Entry | Cost of Goods Sold | $4,095,000 | ||||
| 15 | Ave SP, All Phases | $73,313 | Gross Profit | $1,746,600 | ||||
| Interest | $ 197,985 | |||||||
| Sale Costs | Profit Before Tax | $1,548,615 | ||||||
| 16 | % RE Commission | 2.50% | < Enter % | |||||
| 17 | % Closing Costs | 1.50% | < Enter % Cost | |||||
| Development Cost (Incl All Costs Except Interest & Sale Costs) | Ratios & Measures | |||||||
| Gross Profit Margin | 28.70% | |||||||
| 18 | Ave Per Lot DC (Ph 1) | $30,000 | < Per Lot Cost Ph 1 | Profit Margin Bef Tax | 25.45% | |||
| 19 | Ave Per Lot DC (Ph 2) | $32,000 | < Per Lot Cost Ph 2 | Land Cost/Total Rev | 24.65% | |||
| 20 | Ave Per Lot DC (Ph 3) | < Make No Entry | ProjeAct | |||||
| R PjjjAhhAA | ||||||||
| 21 | Ph 1 Permitting, Extraordinary Costs, Adjustments, etc. | $15,000 | < Enter $ Amount (Not Per Lot Amt) | Duration of Project in Years | 3.71 |
|||
| 22 | Ph 2 Permitting, Extraordinary Costs, Adjustments, etc. | < If App, Enter $ Amt (Not Per Lot Amt) | AverageAverage |
|||||
| 23 | Ph 3 Permitting, Extraordinary Costs, Adjustments, etc. | < Make No Entry | R A | |||||
| Average Annual Return on Equity |
63.54% |
|||||||
Construction &
Holding Period
The duration of the initial construction period
has a significant impact on project profitability.
The
shorter the construction period, the more profitable the project. In
other words, the shorter the construction period the faster you can
begin
the
business of selling lots. However, the developer
often
has
little control over this component. Construction may be delayed for a
variety of reasons - weather conditions, permitting issues, material
shortages, contractor problems, and so on. The construction and holding
period can be adjusted from one to eleven months. See
lines 24 through 27 below.
Absorption Rate
The absorption rate
is probably the most important land development component.
If lots do
not sell, the project is doomed. We assure
you, measurement of
the effect on profit as the absorption rate is modified should routinely be used in 'what-if' analysis. Note that the model calculates the minimum absorption rate. See
lines 28 through 29 below (Macro provided).
Interest
Rate Trend
The interest rate
that accompanies an acquisition and development loan generally
is
tied to a published rate such as the prime rate. The
model allows
the user to factor the interest rate trend, up, down, or flat, into the
profitability
estimate. See lines 30 through 34 below.
Scroll down to view other sections of the input page.
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Lender Requirements
Most
land
developments are financed with a bank loan.
Naturally banks have a set of lender requirements
upon which the loan is based. For instance, they will
require that the
loan is entirely paid off by the time a certain percentage of lots are
sold. They will require that a certain percentage of the revenue from
each lot sale be applied to loan reduction. They will require the
developer to contribute, in cash and/or subordinated loans, a certain
percentage of the initial cost of the project. Another way to say this is, the
bank will lend up to a certain percentage of the initial cost
of
the project. And finally, in the case of a phased project with no
option agreement(s), the bank will lend a certain percentage on
residual land (land purchased up front by the developer to be used for
future phases. See lines 35
through 38 (Macro provided).
Seller
Financing
Many
times it is difficult for a developer to come up with
the entire
initial cash requirement. This problem can, and often is,
resolved if the landowner agrees to provide seller
financing.
The model allows for analysis of seller financing on lines
40 through 45.
Owner Taxes
(Non-Mandatory Entries)
One
of the model assumptions is that the
developer's ownership is in the form of a
pass-through entity (i.e., S-Corp, LLC). As such
the entity is
not
taxed,
but project
income flows through to the owner personally and is
taxed at his or
her marginal tax rate.
If multiple developer/owners are involved with the project, each
owner is taxed at his or her marginal rate under his or
her preferred or required filing status. But no
matter what the investors filing
status or percentage ownership, all
owners deal with profit before tax. With this in
mind, the focus most often will be on the before tax
numbers generated
by the model.
The model allows owners to calculate individual tax liability by entering applicable percentage ownership and filing status on lines 46A and 46B. Note that entries on lines 46A and 46B are not mandatory. They simply provide a way for individual owners to estimate income taxes. To view output for an individual owner, married filing jointly, with a 35 percent ownership in the sample project, go to the owner tax calculation page.
The model allows owners to calculate individual tax liability by entering applicable percentage ownership and filing status on lines 46A and 46B. Note that entries on lines 46A and 46B are not mandatory. They simply provide a way for individual owners to estimate income taxes. To view output for an individual owner, married filing jointly, with a 35 percent ownership in the sample project, go to the owner tax calculation page.
Scroll down to view the last section of the input page.
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Non-Mandatory
Entries
Total
acres and acres per phase are not mandatory input entries. This is to
say that the profit and cash flow calculations
will be unaffected if entries
are
not made here. The project summary table is enhanced, however,
if entries are made on lines
47 and 49 through 53
because revenue, cost and profit items are reduced to a per acre basis (See last
column of the project summary table).
Talk of per acre prices is commonplace in the land business,
but
price per lot is actually a much more important measure.
Model Consistency Section
The
model consistency
section
of the model is useful because it alerts you to inconsistencies as well
as entry and non-entry errors. It also prompts and directs you
as to how
to correct the inconsistencies.
See lines 57 through 71 below.
The answers to all these questions must be 'Yes' or 'N/A' or
you have made one or more entry errors.
We have made a few deliberate entry errors in the sample project so you can observe how this important portion of the model works. Click here to see the prompt column and model consistency section at work!
We have made a few deliberate entry errors in the sample project so you can observe how this important portion of the model works. Click here to see the prompt column and model consistency section at work!
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If you wish to ask us a question about the model, 'Contact
Us' and we will get back to you
as soon as possible.
That's
it! You now have learned how the model's input page
works. Now spend a few minutes looking
at the ouput
tables,
schedules, and reports that are generated when the land development
components are entered to the input page. To do that, go to
the model output page.
Or, if you have seen enough and would like to purchase the LDM, click the 'Buy Now' link below, and remember, the purchase is totally refundable if you are not 100 percent satisfied.
Or, if you have seen enough and would like to purchase the LDM, click the 'Buy Now' link below, and remember, the purchase is totally refundable if you are not 100 percent satisfied.
You can't go wrong at just $75.00!
Land Development Model, LLC
302 West Lafayette Road
Medina, OH 44256
330.441.1690
302 West Lafayette Road
Medina, OH 44256
330.441.1690