Property Development Financial Feasibility
A Feasibility Study might be thought of as the ‘Business Plan’ of your property development project.
Successful property development needs a great deal of meticulous planning. To make your vision come to life you need a lot of moving parts, all working together. The most important thing to ensure before you start is that the project is going to be financially viable.
Before you commit to the project, you need to know that you’re going to make a profit. A Feasibility Assessment is instrumental in determining this. This document will ensure you know your numbers from the start, and nothing is overlooked.
A Feasibility Assessment will incorporate individual cost categories and provide an accurate vision of the value of your development. Delcon Design and Construct are property development builders in Melbourne. Before we work with any client, we provide a free Financial Feasibility Assessment. We’re dedicated to our clients’ success. Occasionally a new client will come to us and their proposed projects do not have the margin they anticipated, or are not at all feasible. If this occurs, we let them know and unlike some other builders, will not take on the project.
The results of the Feasibility Assessment help determine sustainability. The process of Property Development involves integration of design teams, council, banks, construction timelines, and settlement timelines. This is a delicate balance and any variation in timing or costs has the potential to eat into, or destroy, the chance of profit.
A Feasibility Assessment will define the required timelines in order to achieve your desired return of investment. This helps you avoid a serious mistake in judgement early on if the numbers aren’t what you expected.
For a detailed description of what a Feasibility Assessment includes, read our previous article here https://delcon.net.au/article/how-to-know-if-a-property-development-is-feasible.
To see a Feasibility Assessment in action, and find out how to get your own, click here.
The costs that your Profitable Feasibility Assessment includes are:
Initial costs: Acquisition, Land Deposit, Stamp Duty and Legals, Lenders Mortgage Insurance (LMI) if applicable, Loan Interest Rate, Loan to Value Ratio (LVR), Anticipated Loan Interest (based on a typical overall timeline of 12-24 months), Construction Deposit, Construction Loan Amount, Anticipated Construction Interest (based on a typical build schedule of 6-12 months)
Planning and preliminary costs: Project Potential Review, Town Planning (all documents, applications and permits), Preliminaries (working drawings, engineering, etc), Construction (building contract and project specification)
Construction costs: Complete cost for each dwelling and GST
Other costs: Council Public Open Space contribution (if applicable), Subdivision fees, Real Estate Agent fees
With these numbers, you’ll be able to highlight possible risk areas that may lead to problems down the road. This may prompt you to reconsider elements of the project, ensure you’re maintaining timelines, or avoid the project altogether.
The complexity of taking all these elements into account can seem daunting, but the process is made smooth when the right, experienced team is involved. Let us assist you in completing your Melbourne based townhouse, duplex, triplex or multi-unit development project.