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Who Benefits?
Architects
Building Component Manufacturers
Commercial Building Developers
Building Contractors
Design/Build Contractors
Estimators
Industrial Contractors
Steel Fabricators
Structural and Civil Engineers

NOT FOR FINAL DESIGN!

FINAL DESIGN SHOULD ALWAYS BE PERFORMED BY
PROFESSIONAL ENGINEERS ACCORDING TO LAW.

RSMeans Square Foot Costs 2006 is useful to anyone who needs rapid budget cost estimates.
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WINBUILDIT
Architectural optimization software qualifies projects in 20 minutes.
Stops wild goose chases! Saves $ Millions!


INTERNAL RATE OF RETURN Best for Planning Purposes

The term "Return on Investment" is frequently bandied about but becomes irony when the most popular method for computing it actually discourages investment.  (Why?)

From heavy industry experience and financial writings we learn that methods of Net Present Value (NPV) and Internal Rate of Return ("IRR") are preferred for the analysis of complex cash flows. (think flipping, inflation etc.)  The  difficulty of applying these methods may account for their infrequent use in the building industry.  Of these methods that of Internal Rate of Return is particularly attractive because it yields a result that can be directly compared to the interest rate returned by other common investments including bank interest, stocks, bonds etc.  This gives client/investors a clear and familiar "benchmark" from which a reasoned judgment of qualification and impacts of project optimization can be made.  The basis of qualifying then becomes:

AT EQUAL RISK A PROJECT IS FINANCIALLY QUALIFIED IF IT'S IRR EXCEEDS THE COST OF CAPITAL AND THE RATE OF RETURN AVAILABLE FROM OTHER INVESTMENTS PROVIDING PROJECT COST IS WITHIN BUDGET.

CREATIVE ENGINEERING had previously created computer code for mine engineering programs that automated both the computation of Internal Rate of Return and structural steel design.   Programs including these features have now been in use worldwide for over 20 years.  

WINBUILDIT adapts these features to steel framed commercial buildings but recognized that wild dreams, stiffening seismic and structural period requirements make some concepts impractical.  The automatic structural design feature screens these out before determining the structural weight needed to calculate the fabricated erected cost.  The UBC 1997 is the basis.  In the event any  member is over-stressed it is "red lined" and the cause identified and displayed.  After correction steel and other costs are computed by an RSMeansr Square Foot Costs compatible relational data base.  COST, REVENUE and INTERNAL RATE OF RETURN are the key final display results.

Client confidence is always essential.  Since the IRR method reflects the entire life cycle of a building from concept to final sale the majority of data entries are those the client must dictate.  (They do not include building cost and construction time but include rental rates, maintenance, interest cost, predicting inflation effects, taxes, percent of space leased, term of ownership and final sale price)

The writers of WINBUILDIT recognized this preponderance and its importance to a convincing result but also knew the short attention span of busy clients.   To counteract that habit WINBUILDIT was contrived to function in "the time it takes for a coffee break".  This to ensure client presence, confirmation, and input during the entire process.  The end result then becomes convincingly the CLIENT'S CREATION.

The power of this has been seen before when prospects grab the computer to play their own "what if"  scenarios.   Using IRR as a measuring stick for business efficiency is found intriguing.   It has instant appeal to ambitious managers turning the investment decision making  process away from the "used car" mind-set towards core investment values.  Arguments for quality have persuasive support.

Marketers will gain a sense of what the qualifying IRR is that drives the client.   Envisioning a forward business development plan falls into place.   Absent direct knowledge of what IRR a client has in mind a general knowledge of investment returns provides a useful benchmark for planning purposes.   Not as jazzy as the fabled crystal ball but fully functional.

Here's Why Capitalization Rate Basis Discourages Investment   

Articles in the Wall Street Journal (June 2 and 6, 2007)  suggest that a return, calculated on the widely used capitalization rate basis, of 5 to 6% is considered acceptable if a "bet" on a future sale price, "flipping", is obtainable. 

Distressed at this "betting" business we investigated further.  The "Marketing Handbook for the Design & Construction Professional"  doesn't address this subject while "The Wall Street Journal Complete Real-Estate Investing Guidebook" advises "SPREADING YOUR BETS" (p 172).  

With so many solid mutual funds paying above 9% it's illogical (for non gamblers) to invest in a new commercial building at 5-6%.  This confusion  discourages investment.  Is it any wonder that  most proposed commercial buildings never get built?

CREATIVE ENGINEERING  (USA)
Don Suverkrop, P.E.

3513 Century Drive, Bakersfield, CA 93306-1238  -- Phone: 661 872 4763, Fax: 661 871 1798