# Assumptions

# Assumptions and Notes

The calculator is in Beta Testing. We appreciate your help if you notice any bugs or unrealistic assumptions please be in touch.

#### Construction Costs

*New and garage conversion:*

- Garage conversions use the same cost assumptions as new construction because they often entail major work (e.g. replacing the roof; removing the slab concrete floor, adding a vapor barrier and re-pouring the concrete.) Sometimes this work is not necessary and the costs are lower.
- $375 per square foot costs for the first 500 square feet. After 500 sf, the cost drops to $350 per sf.
- Minimum cost of construction is $150,000. Multiply by 0.8 for low cost finishes and 1.2 for high cost finishes.
- $15,000 for each bathroom more than typical (e.g. 1 bedroom, 2 bath would be $15,000 more).
- Use a multiplier of 1.2 – 1.5 for construction costs if the conditions/construction is difficult.

*Conversion of part of house:*

- $40 per sf for finishing, sanding, etc.
- $22,500 for a new bathroom
- $30,000 for a new kitchen ($10,000 for a partial kitchen),
- $10,000 each if you are separating or installing new water, electrical or heating system.
- Later versions of the calculator will differentiate between finishing an attic or basement and splitting the house in two.

*Modular:*

- Costs of $350 per sf, dropping to $300 per sf if over 500 square feet.
- Minimum cost of construction is $100,000 for a modular unit.
- Same multipliers for difficult conditions or high end finishes.

*Soft Costs:* Soft costs calculated at 35% of the calculations described above. An architect is an example of a soft cost.

*Fees:* Fees vary based on recent projects in the jurisdiction. The calculator uses county averages for some or all of the fee data for the following cities โ Atherton, Burlingame, Daly City, East Palo Alto, Foster City, Menlo Park, Millbrae and Woodside. Fees are in addition to the costs above.

*Source: Developer interviews, review of permits.
*

#### Management

5% of rent

*Source: Management company interviews*

#### Property Value Increase

- 100 times the monthly market rate rent for new construction/modular.
- No increase if it is a conversion of part of a house. In a future version of the calculator, a separate calculation will be provided for converting a basement, which will increase value from splitting a house in two as compared to converting part of a house, which will not increase value.
- The value for converting a garage is 75 times monthly rent.

*Source: Realtor interviews*

#### Insurance

0.25% of construction cost. Year 1 construction costs based on calculations as detailed above. Construction costs are then increased over time by 5% a year, meaning the insurance costs will be higher in year 10, even though they are still based on the formula, 0.25% times construction cost.

*Source: Insurance companies.*

#### Inflation

2% per year.

#### Vacancy Rate

4% (2 year average length of tenant, 2 weeks between rentals)

#### Average Rent Increase

- Teachers โ 2% per year.
- Others โ 5% per year

#### Property Value Increase

5% per year

*Source: Based on historical data, but the number varies dramatically depending on what time period you are looking at.*

#### Repairs and Capital Replacement Costs

0.5% of construction costs, reduced for years 1-10.

*Source: Conversation with builders and architects*

#### Tax Rate

1.15%

*Source: Assessor and Comptroller data.*