Tod went back and crunched numbers on each of the projects.
<table>
<tbody>
<tr>
<td></td>
<td>
Low Density
</td>
<td>
Medium Density
</td>
<td>
High Density
</td>
</tr>
<tr>
<td></td>
<td>
30 units (assumed)
</td>
<td>
70 Units
</td>
<td>
150 units
</td>
</tr>
<tr>
<td>
Total Cost of Project (in million)
</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Residential-only
</td>
<td>
$17.0
</td>
<td>
$30.0
</td>
<td>
$47.0
</td>
</tr>
<tr>
<td>
Commercial/Mixed Use Properties
</td>
<td>
$21.0
</td>
<td>
$38.0
</td>
<td>
$78.0
</td>
</tr>
<tr>
<td>
Total Revenue (in Millions)
</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Residential-only
</td>
<td>
$36.0
</td>
<td>
$70.0
</td>
<td>
$120.0
</td>
</tr>
<tr>
<td>
Commercial/Mixed Use Properties
</td>
<td>
$54.0
</td>
<td>
$105.0
</td>
<td>
$225.0
</td>
</tr>
<tr>
<td>
Total Profits (in millions)
</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Residential-only
</td>
<td>
$19.0
</td>
<td>
$40.0
</td>
<td>
$73.0This book''s true home is on another platform. Check it out there for the real experience.
</td>
</tr>
<tr>
<td>
Commercial/Mixed Use Properties
</td>
<td>
$33.0
</td>
<td>
$67.0
</td>
<td>
$147.0
</td>
</tr>
<tr>
<td>
Return on Capital Employed (Profits / Cost)
</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Residential-only
</td>
<td>
111.76%
</td>
<td>
133.33%
</td>
<td>
155.32%
</td>
</tr>
<tr>
<td>
Commercial/Mixed Use Properties
</td>
<td>
157.14%
</td>
<td>
176.32%
</td>
<td>
188.46%
</td>
</tr>
</tbody>
</table>
He only had $29million left. So theoretically, the mixed use property project would yield the best payoff. For $21million, we would be able to make at least $54million.
But would it be better if he modeled a medium density project instead? Since the assumed 70 units can be lowered to maybe about 35 to 50 units. So, focusing just on commercial/mixed use properties, he calculated how much he could generate.
<table>
<tbody>
<tr>
<td></td>
<td></td>
<td>
Medium
</td>
<td>
Medium
</td>
<td>
Medium
</td>
</tr>
<tr>
<td>Number of units</td>
<td>
</td>
<td>
35 units
</td>
<td>
40 units
</td>
<td>
50 units
</td>
</tr>
<tr>
<td>
Total Cost of Project (in million)
</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Commercial/Mixed Use Properties
</td>
<td></td>
<td>
$20.5
</td>
<td>
$23.0
</td>
<td>
$28.0
</td>
</tr>
<tr>
<td>
Total Revenue (in Millions)
</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Commercial/Mixed Use Properties
</td>
<td></td>
<td>
$52.5
</td>
<td>
$60.0
</td>
<td>
$75.0
</td>
</tr>
<tr>
<td>
Total Profits (in millions)
</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Commercial/Mixed Use Properties
</td>
<td></td>
<td>
$32.0
</td>
<td>
$37.0
</td>
<td>
$47.0
</td>
</tr>
<tr>
<td>
Return on Capital Employed (Profits / Cost)
</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Commercial/Mixed Use Properties
</td>
<td></td>
<td>
156.10%
</td>
<td>
160.87%
</td>
<td>
167.86%
</td>
</tr>
</tbody>
</table>
Ah. If he spent $28million, he would be able to get $75million back, increasing his entire cash position by $47million. That’s amazing, but it assumes that he actually does sell all 50 units for $1.5million.
Should he do some market survey?
Were these 3 cities ready for a 50 unit development project? Surely with their population for 50-70 thousand, they can easily eat up $75million worth of properties! He just needed 50 wealthy citizens! The math checks out!
With $75million, he could reinvest it into more properties, and then he could work on new lines!
Wait.
Is he a property developer, or a rail transit developer? Was he going astray?
He thought about it for a moment and remembered that property values and high density properties must work together with public transport. If the property funds more public transport, that’s a good thing overall.
Steps that he needed to take to get where he wanted to be!