Predevelopment Burn Gap Calculator

Pre-development burn can deplete sponsor equity before ground break.

Predev cash available

Monthly burn

Permit date month

Financing close month

Runway gap (months)

1.7

Cash at financing

$250,000

Total burn through close

$2,250,000

How the math works

Total burn = monthly × months to close. Remaining = predev cash − total burn. Gap = runway − required months.

$2.5M / $150k = 16.7 months runway vs 15 required = 1.7 months cushion. $150k × 15 = $2.25M burn, $250k left.

How to Use

Enter available predevelopment cash.
Enter monthly burn rate.
Enter expected permit date month.
Enter financing closing month.
Read runway vs required months.

Frequently Asked Questions

What's predevelopment burn?

Cash consumed before construction financing closes: land acquisition, deposits, architect, engineer, attorney, consultants, planning studies, community outreach, permits, taxes on land, insurance, development team payroll. Typical $0.5-5M range depending on project size. Large project (250+ unit multifamily): $2-4M predev. Small project (50-100 unit): $0.3-1M. Office/retail development: $1-5M. All sponsor equity (risk capital) — not financeable.

Why does it blow budgets?

(1) Entitlement delays stretch timeline — each extra month burns $20-100k. (2) Architect and consultant scope creep. (3) Unexpected studies required (traffic, environmental, historic). (4) Community benefits negotiation extends timeline. (5) Political opposition (can require multiple rounds of revision). 40-60% of predev budgets are blown. Experienced sponsors buffer 25-40% contingency.

How do sponsors fund predev?

Sponsor equity (most common). Predevelopment loan (rare, expensive — 12-18% rate with take-out financing commitment). LP co-investment (some institutional LPs will co-fund predev alongside sponsor for a pref share). Family office pre-development capital (expensive but patient). Most sponsors personal-fund or use fund reserves. Don't over-commit — predev is the highest-risk capital in the development cycle.

What triggers walk-away?

(1) Entitlement risk materializes (community opposition, design rejection, environmental problem). (2) Market shifts during predev (rent projections drop 15%+, cap rates widen 100 bps+). (3) Cost inflation outpaces budget (2022-2023 saw 15-30% construction cost increases). (4) Runway nearly depleted with unclear next milestone. Smart sponsors walk at $1M in if path-to-close looks unlikely. Amateurs sunk-cost continue at $3-5M in, making it worse.