Profit and loss balance analysis of real estate development projects

There are two kinds of breakeven analysis of real estate projects: critical point analysis and breakeven point analysis. The main difference between them lies in the setting of the balance point. Critical point analysis is to analyze and calculate the change of one or more risk factors to make the real estate project reach the limit value of the allowable minimum economic benefit index, and to express the risk degree of the real estate project with the combination of critical values of risk factors. Break-even point analysis is to analyze and calculate the limit value when one or more risk factors change and the real estate project reaches zero profit, and express the risk degree of the real estate project through the combination of critical values of risk factors. The following is a break-even analysis of real estate development projects, welcome to read.

List method and graphic method can be used for the analysis and calculation of the critical value of a single risk factor, and list method can be used for the analysis and calculation of the combination of critical values of multiple risk factors.

(A) the minimum rental price analysis

Rent and selling price are the most important uncertain factors of real estate projects, and whether the predetermined rent and selling price can be reached is usually the key to the success or failure of real estate development investment projects.

(2) Analysis of minimum rental and sales amount

Minimum sales volume and minimum occupancy rate are also the most important uncertain factors of real estate projects. Under a certain rent level, whether the ideal quantity can be sold at a predetermined price or the ideal rent level is usually the key to the success or failure of development investment projects.

(3) the highest land purchase price

The highest land purchase price refers to the highest sustainable land purchase price under the condition that the sales and other expenses of development projects remain unchanged and the expected income level remains unchanged.

(4) Maximum project cost

The maximum project cost refers to the maximum project cost that can be undertaken to meet the expected income requirements of the development project under the scheduled sales situation. The greater the gap between the highest project cost and the predicted possible project cost, the greater the ability of the development project to bear the risk of project cost increase.

(5) Maximum purchase price

For real estate investment projects, the initial purchase price is very important to achieve the expected investment income target.

(6) Maximum operating expense rate

Operating expenses ratio refers to the ratio of operating expenses of investment properties to total rental income.

(7) Multi-factor critical point combination

Many risk factors change at the same time, which leads to the change of the economic benefit index of the development project and reaches the critical point. At this time, the combination of the change values of various factors becomes the combination of multi-factor critical points.

Examples of breakeven analysis of real estate development projects;

Breakeven point analysis

(2) Critical point analysis

Extended reading: the basic principle of break-even analysis

Break-even analysis is a method to study the balance between product cost, production and sales volume and profit of investment projects under the market conditions of complete competition or monopoly competition. For an investment project, with the change of production and sales, there will generally be at least one turning point in profit and loss. We call this turning point the break-even point (BEP). At this point, the sales revenue and total cost are equal, and there is neither loss nor profit. Break-even analysis is to find out the break-even point of the project scheme.

The basic method of break-even analysis is to establish the functional relationship between cost and output, sales revenue and sales volume, and find the balance point through the analysis of these two functions and their graphs.

Breakeven analysis includes linear breakeven analysis and nonlinear breakeven analysis. When the output is equal to the sales volume and the change of production and sales volume does not affect the market sales price and production cost, there is a linear relationship between cost and output, sales revenue and sales volume, and the break-even analysis at this time belongs to linear break-even analysis. When there are monopolistic competition factors in the market, the change of production and sales will lead to the change of market sales price and production cost. At this time, there is a nonlinear relationship between cost and output, sales revenue and sales volume, and the corresponding break-even analysis belongs to nonlinear break-even analysis.