Entrepreneurial Profit
The return a developer requires for the risk and effort of creating a property — the difference between total development cost and completed value. Omitting it is a classic cost-approach error: nobody builds for free.
Related Terms
Cost Approach
A valuation method that estimates value by calculating the cost to reproduce or replace the improvements, subtracting accrued depreciation, and adding the land value.
Cost New
The current cost to construct the improvements — as reproduction cost (an exact replica) or replacement cost (equivalent utility with modern materials and design).
Feasibility Analysis
The study of whether a proposed project's value upon completion exceeds its total cost, including profit.
More in Valuation Approaches
View allSales Comparison Approach
A valuation method that estimates a property's value by comparing it to similar properties that have recently sold in the same market area.
Income Approach
A valuation method that estimates a property's value based on the income it generates or is expected to generate.
Market Value
The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus..
Reconciliation
The process by which an appraiser evaluates and weighs the results from the different valuation approaches (sales comparison, cost, and income) to arrive at a final opinion of value..