And don’t worry if you think there’s still a considerable margin of error here – that’s perfectly normal.
The next step is to speak to your professional team. You’re looking to bring them up to speed on the project so that they can give you a steer on pricing assumptions, and in some cases, receive an estimate or quote for their fees or costs. Here you’re going to be talking to your architect, planning consultant, contractor, project manager, and structural engineer. You may need to bring in additional professionals if there are some specific issues with the project that need pricing up, e.g., demolition. A common mistake is to forget that the generic assumptions in your analyser are still assumptions. No matter how reasonable you think they are, they will still need validating. This can be a particular challenge with construction costs. Your contractor may have given you a quote just a few weeks ago, and so you thought things couldn’t possibly have changed much. These can prove to be famous last words, so please always double-check.
When it comes to the construction costs specifically, you’ll want to get the input of a cost consultant (a.k.a. a quantity surveyor). They’ll be able to give you an estimate of the lump sum cost or at least an indication of a cost range based on the building type and its geographical location. This needs to be a staged refinement process, where you start with high-level estimates, which you then stress test. If the deal stacks initially, you can move to the next stage before testing again. This second stage may involve sharing the agent’s particulars, site measurements, floorplans, etc., allowing the cost consultant to refine their estimate. This refinement process happens throughout the life of a project, and it should apply to every figure in your analyser. The critical point is that by firming up numbers in stages, you get a chance to veto bad deals as early as possible, i.e., before you, your cost consultant, and others in your team have done a load of work only to find the numbers don’t stack.
Another element to factor into your numbers is the freehold value, assuming you’re building leasehold flats. There’s been a lot of media coverage about freeholds, but as I write, they are still worth money and, in many cases, could boost your profits by a healthy five figures. Don’t make the rookie mistake of giving away the freehold with your units without first checking that it wouldn’t be more profitable to sell it separately.