Rex says
Money math without the spreadsheet headache. Plug in your numbers and I'll show you exactly where the dollars land.
Try a scenario
Click to load — tweak from there.Inputs
Result
Yield-on-cost
8.75%
Spread over market cap rate
300
Value created at completion
$2,504,348
Total project cost
$4,800,000
Value at market cap rate
$7,304,348
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How to use this
- 1Enter land cost ($).
- 2Enter hard construction costs ($).
- 3Enter soft costs (design, permits, legal) ($).
- 4Enter construction financing carry cost ($).
- 5Enter projected stabilized annual noi ($).
- 6Enter market cap rate for comparable stabilized assets (%).
- 7Read your yield-on-cost on the right — it updates as you type.
- 8Hit Share to keep the scenario or send it to someone.
About this calculator
Yield-on-cost (also called developer's yield or building yield) is the ground-up development equivalent of cap rate: stabilized NOI divided by total project cost, including land, hard costs, soft costs, and financing carry during construction and lease-up. Developers compare this figure against prevailing market cap rates for stabilized, built assets — the gap between the two is the 'development spread,' which compensates you for construction risk, entitlement risk, and lease-up risk versus simply buying a finished asset. A healthy development spread is typically 150-250 basis points above market cap rate; anything tighter than 100bps usually means the risk-adjusted return doesn't justify building versus buying an existing stabilized property. This calculator totals your project costs, divides projected stabilized NOI by that total to get yield-on-cost, and compares it against a market cap rate you input to show the spread in basis points and the implied value creation (the difference between what the finished project is worth at market cap rate and what it cost you to build).
Worked example
Using the values the calculator loads with:
Inputs
- Land cost: 800000 $
- Hard construction costs: 3200000 $
- Soft costs (design, permits, legal): 500000 $
- Construction financing carry cost: 300000 $
- Projected stabilized annual NOI: 420000 $
- Market cap rate for comparable stabilized assets: 5.75 %
Results
- Yield-on-cost: 8.75%
- Spread over market cap rate: 300
- Value created at completion: $2,504,348
- Total project cost: $4,800,000
- Value at market cap rate: $7,304,348
What each field means
Inputs
- Land cost ($)
- The land cost used in the calculation, measured in $. Starts at 800000 $ so you have a working example on load.
- Hard construction costs ($)
- The hard construction costs used in the calculation, measured in $. Starts at 3200000 $ so you have a working example on load.
- Soft costs (design, permits, legal) ($)
- The soft costs (design, permits, legal) used in the calculation, measured in $. Starts at 500000 $ so you have a working example on load.
- Construction financing carry cost ($)
- The construction financing carry cost used in the calculation, measured in $. Starts at 300000 $ so you have a working example on load.
- Projected stabilized annual NOI ($)
- The projected stabilized annual noi used in the calculation, measured in $. Starts at 420000 $ so you have a working example on load.
- Market cap rate for comparable stabilized assets (%)
- The market cap rate for comparable stabilized assets used in the calculation, measured in %. Starts at 5.75 % so you have a working example on load. Accepted range: 1–15 %.
Results
- Yield-on-cost
- Returned as a percentage and shown as the headline result. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Spread over market cap rate
- Returned as a whole number. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Value created at completion
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Total project cost
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Value at market cap rate
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
FAQ
What's a typical target development spread?
150-250 basis points above market cap rate is a common institutional target for ground-up multifamily or industrial development, compensating for entitlement, construction, and lease-up risk. Riskier product types (hospitality, speculative office) or less certain markets often require 300bps or more to justify breaking ground.
Why does this metric matter more than cap rate for new construction?
Cap rate assumes you're buying a stabilized, cash-flowing asset today; yield-on-cost accounts for the fact that you're bearing 18-36 months of construction and lease-up risk before that NOI materializes, with no guarantee rents or costs land where projected. The spread is your compensation for that uncertainty.
How sensitive is this to construction cost overruns?
Very — a 10% hard cost overrun on a project where hard costs are 70% of total budget directly cuts yield-on-cost by roughly 6-7%, since NOI stays fixed while the denominator grows. Always stress-test yield-on-cost at 10-15% cost overrun before committing to a development deal.
Does this include developer profit/fee?
Not automatically — if your total project cost figure already includes a development fee paid to yourself or a GC, that's fine; if not, add it as a line item before computing, since skipping it overstates your real yield-on-cost relative to what an arm's-length buyer would pay for the finished project.
Accuracy and limitations
- Results are estimates before tax, fees, and inflation unless an input explicitly covers them.
- Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.
- This is educational maths, not financial advice. Check anything contractual with the lender or your accountant.
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Cite this calculator
Writing about this topic? Grab a citation — every link helps keep these tools free.
RevenueLab. (2026). Land Development Yield-on-Cost Calculator. Retrieved from https://www.revenuelab.fyi/toolbox/land-development-yield-on-cost
<p>Source: <a href="https://www.revenuelab.fyi/toolbox/land-development-yield-on-cost" target="_blank" rel="noopener">Land Development Yield-on-Cost Calculator — RevenueLab</a> (2026).</p>
Source: [Land Development Yield-on-Cost Calculator — RevenueLab](https://www.revenuelab.fyi/toolbox/land-development-yield-on-cost) (2026).