How to Calculate Developer Fees

A developer designs, manages and takes a financial risk in developing property.

A developer's fee is compensation for the developer's time and for taking on the risk of developing a commercial or residential construction project. There are many variables that determine the exact amount of the fee. If you do not know the exact fee you can estimate it, taking into account the size, risk and total cost of the project. Also consider the developer's interest in the property. For example, if the developer will be helping to manage the property and will be making a profit on it, this will decrease the fee. The fee is a percentage of the total cost of development. You can use this method to estimate the dollar amount.

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Step 1

Convert the developer's fee percentage into decimal format. For example, if the fee is 5 percent, you would have a percentage of .05.

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Step 2

Calculate the total cost of the project. This includes all labor, the cost of the land, materials and time. If you are unsure, consult the developer.

Step 3

Multiply the total cost of development by the percentage in decimal form. For example, if the cost of development is $500,000 and the developer's fee is 5 percent, your equation would be 500,000 x .05.

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Step 4

Double-check your multiplication. The result of multiplying the total cost of development by the percentage in decimal form is the developer's fee in dollars. For example, 500,000 x .05 = 25,000. The developer's fee is $25,000.

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