A proper "build to" analysis would require you calculating your NOI, which in this case is $50,000 and dividing it by your construction costs. Below is a simple sources and uses calculation for the development. Sources and Uses Sources Debt 70% LTV $440,000 Equity $192,100 Total $632,100 Budget/Uses Land Cost $120,000 Planning/Design Approvals $50,000 Hard Construction Costs $400,000 Developer Fee (5% of P/D/A + Hard Costs) $22,500 Accrued Interest During Construction $19,600 Contingency $20,000 Total $632,100 Given construction costs of $632,000, the "build to" calculation is as follows