Question 1

How is yield on cost applied in Florida development?

Accepted Answer

FL YOC: FL developers use YOC to: justify development in high-cost FL markets. FL-specific considerations: land (FL coastal and urban land costs: can represent 20-40% of total development cost), construction (FL labor and material costs: have increased 30-50% since 2020), insurance (FL property insurance: can reduce NOI by 15-25% compared to other states), impact fees (FL impact fees: vary by county from $5,000 to $30,000+ per unit), and taxes (FL property taxes: millage rates of 15-25 mills depending on location). A typical FL YOC target: 7-9% for multifamily and 8-10% for commercial development. Below these thresholds: the development may not justify the risk.

Question 2

What is a good yield on cost for Florida real estate development?

Accepted Answer

Good FL YOC: the target depends on: property type (multifamily: 7-9%; office: 8-10%; retail: 9-11%; industrial: 7-9%), market (Miami: higher costs = lower YOC acceptable if: appreciation potential is strong; secondary markets like Tampa and Jacksonville: higher YOC expected), and risk (ground-up development: requires higher YOC than renovation; entitled land: lower risk than raw land). The spread: YOC should exceed the market cap rate by: at least 100-200 basis points. If the market cap rate is 5.5%: the developer should target a YOC of at least 7%. Below the cap rate: the developer is better off buying an existing property.

Question 3

How do Florida developers improve yield on cost?

Accepted Answer

Improving YOC: reduce costs (value engineering: reduce construction costs without sacrificing quality; negotiate land price; minimize soft costs), increase income (maximize rents: premium finishes, amenities, and location; minimize vacancy: pre-leasing and marketing), optimize design (maximize rentable square footage: efficient floor plans and building layouts; reduce common area: increase net-to-gross ratio), and phase development (build in phases to: reduce risk and start generating income sooner). FL-specific: take advantage of Live Local Act incentives (affordable housing: tax incentives and zoning flexibility), seek property tax abatements for: affordable housing components, and use energy-efficient design to: reduce operating costs and insurance premiums.

Yield on Cost Analysis: in Florida

Yield on Cost: FL Development

FL Targets

FL Factors

Improving YOC

Related Terms

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