Property Development Feasibility Study: Discover the Secret to Property Development Success

Expert analysis and information is a game-changer in property development, and this is where a property development feasibility study becomes an absolute requirement.

A detailed feasibility study distinguishes between a bad property investment and a good one. 

Land development decisions can be difficult when so many factors are to consider. And even the smallest mistakes can affect the profitability of your property. So, how can you feel confident about joining a development project? 

It would help if you had a well-planned strategy; a site feasibility study is an important part of that.

Suppose you’re wondering why a feasibility study is an absolute must to make your investment profitable and how an effective feasibility study works in Victoria. In that case, we have you covered with yet another helpful guide.

So let’s find out why your next property development project needs a feasibility study! 

What is a property development feasibility study? 

A feasibility study in real estate is an analysis that you conduct to determine whether it will be profitable to develop a project. When conducting a feasibility study, you consider the proposed location for the development with internal and external factors that might influence it.

The scope of a site feasibility study usually varies depending on the scale of your property development project. Since a feasibility study represents all stages of the development process, you need to consider three different levels of feasibility to form the basis of your planning.

1. High-level feasibility 

The high-level feasibility study is designed to answer the most important question: is the site suitable for development? If you have a specific idea for what you would like to build, a high-level feasibility study can help you assess whether it is feasible to create that project. 

The assessment looks at the site’s main features and any potential limitations. However, a high-level feasibility study is not the only factor you should consider when deciding. This is because you can only get surface-level information from it.

2. Static feasibility 

The next step is to survey and determine what type of property your site is best suited for. You will also discuss any potential issues with an environmental advisor. 

The feasibility of a high-level project is often based on assumptions. Static feasibility is more likely to be based on evidence. This is also where you consider things like land subdivision feasibility.

3. Cash-flow feasibility    

The two upper levels give you the information you need to negotiate a price and decide if you should purchase a site. Your project is not ready for evaluation yet.

A cash flow feasibility assessment gathers all the necessary information to decide. You’ll address concerns like a time-cost or cost-benefit analysis during this level.

Why do we need a feasibility study in property development?  

Every development project planning aimed to ensure increased profits and decreased losses. A property development feasibility study looks at all aspects of property development to give the developer a better idea of how the project will go in the real world. 

Feasibility studies strengthen the project’s viability and credibility, empowering the developer to move forward confidently. Yet several property developers choose not to conduct one; they learn the importance of good planning the hard way, often with serious time and financial loss.

A common misconception is that a site feasibility study is an added cost you can avoid. But as experts in this field with several years of experience, we can assure you that this isn’t the case. Avoiding a property development feasibility study only to save some upfront costs is like losing pounds for pennies.

Benefits of a feasibility study  

To save you from the not-so-great experience, we’ll highlight the benefits of conducting a feasibility study and the potential disaster of leaving out this essential step in property development.

Proof of concept

Ultimately, your confidence in your project’s success comes from its anticipated success. If your feasibility study shows that your project can be done, you can develop a strong trust in it. 

It might sound like a good and profitable idea to build a multi-level apartment building and pack as many units as possible. Still, a thorough site analysis may show that it is within a neighborhood residential zone, and the maximum building height is 9 meters for 2 stories.

The main purpose of a feasibility study is to determine whether a project is practical and profitable. Ensure all data on the site is accurate to ensure the development will be successful. 

Ascertain potential profit 

When you execute a real estate project, cost overruns can mean the life or death of your vision. Therefore, before you even sign one check for a project, you need to understand what costs you may incur. Since estimating the project cost is essential for a feasibility study, you will have complete transparency on costs. 

Once you have all the expenses on hand, you will then be able to learn the expected overruns and how to plan for them by studying them. The more cost errors your feasibility study can reveal, the better. It’s always better to make mistakes in ideation rather than during a running project.

Therefore, a comprehensive feasibility study will not only save you from loss but also allow you to ascertain the profit for your project and make a better decision.

Ensure smooth operations

Although your great idea for a real estate project might appear feasible on paper, you will need the perfect plan to make it a reality. Land development feasibility studies help you determine whether your overall plan can withstand the pressure of successfully executing your project. 

Knowing the loopholes in your plan and effectively resolving them will lead to an uninterrupted development process. This also applies to obtaining council approval for the development and adhering to local residential or commercial property construction regulations. 

Assess your financing

When commissioning real estate projects, your financial capacity is a key factor in determining whether or not to go ahead with the project. A feasibility study can help determine if you have enough capital for the project. 

Real estate projects often fail because of the financial implications of cash flow. Therefore, you need to do a feasibility study to ensure that you not only have enough money to start the project but that you will have sufficient cash flows to support it. 

How does a property development feasibility study work?  

A successful property development feasibility study is essential for any real estate development project. Key components must be accurately covered and addressed to create a comprehensive study. 

These components include the following:

1. Technical feasibility

The success of a development project depends largely on the quality of the technical input. This property development feasibility study provides information on the feasibility by investigating engineering, geotechnical, topographical, and civil factors.

2. Legal feasibility 

A well-researched legal feasibility report provides a comprehensive view of the entire property development project. This key component incorporates input from other departments and professionals, such as consulting a lawyer to verify details of the contracts, titles, zoning laws, and other legal matters are appropriate.

3. Operational feasibility 

Considers whether your site can withhold the concept you have for it or is fit to be developed for your purpose. For example, land subdivision feasibility or site regulations for infrastructure determine how much land is required for your desired outcome.

4. Financial feasibility 

A comprehensive property development feasibility study profile usually includes an accurate and sophisticated financial analysis. This is the main goal of the project. This report includes a revenue profile, budget and expenses, operation costs and projections, profit/loss analysis, and other aspects of your investment.

It also includes purchase details, stamp duty, mortgage details, and other relevant information that may apply to your case of buying the property.

5. Scheduling feasibility 

Your project will require careful planning and scheduling to be completed on time. Financially speaking, knowing your timelines helps you see how well the venture is capitalized. 

Also, when you know when you need to complete a project, you can better determine which buffers to use. A schedule feasibility study can help you get a realistic timetable for completing your project and suggest the best timeframe to work on.

Conduct the perfect feasibility study with SQM Architects  

While you’re set on conducting a property development feasibility study, choosing the experts in your region is better. 

SQM Architects take the feasibility study beyond a simple report and assist you in making the most of your project by providing expert insight on council regulations, site constraints, and design opportunities. 

SQM’s feasibility study contains the following:

• Site analysis
• Regulatory analysis
• Permit requirement
• Development potential analysis
• Development recommendation – with massing diagrams, basic layout and areas, master planning, and yield calculation
• Project time frame estimation
• Project consultant fees estimation

If you’re prepared to have a full-blown feasibility study at an affordable cost, contact our experts for a consultation today and make your next property development project a highly profitable success.