21 Nov Three Important Steps in Determining the Feasibility of Your Property Development Project
Property development is a business, and in order to make sure that the business is worth pursuing or not, you need to determine its feasibility. Before you roll out any property development project, you need to conduct a comprehensive feasibility study to analyse if the project is financially and technically feasible and doable within your working capital.
There are different forms and methods in conducting a feasibility study, but in property development you need to perform the three important steps below:
1. Market research
It is crucial to ensure that the type of project you want to develop will really address tenant or buyer demand in your chosen area. Will the property appeal to your target market and buy within your price range? You must be familiar with the profile of the neighborhood, and what type of individuals are more likely to move there. Also find out the amenities or services that entice buyers to the area.
One good way to do a market research is to approach local real estate agents and find out the type of properties that are best-selling in the area. Take note that your market research is an important part of your feasibility study if you are seeking funding for the project.
2. Consult your property development team
Remember, property development is not a one-person show. You need to find experts and specialists to be part of your team and help you to ensure that the project will be feasible. As early as conducting your due diligence, you should start consulting your team, which must be basically composed of the following:
Property accountant – consult on the best structure to buy a property and ask about the tax implications of developing a property.
Architect or builder – will help you identify the specifics of the property that you can actually build on site.
Bank representative – will help you work on your budget and find the recommended loan structure for your project.
Solicitor – will help you check for easements or restrictive covenants that may affect the property. They will also help you in drafting the property deal for you.
Real estate agent – will help you determine the value of the project as well as the rental returns when completed.
Surveyor – will prepare the subdivision plan and possible costs such as service connection and sewer extension.
The professionals mentioned above have their specific fees when you engage their services. You should take note of these fees and include them in working on the next step.
3. Crunch the numbers
Running the numbers to determine the profitability of the project is the core of your feasibility study. You need to find out the following costs:
- Purchase price of the property (plus legals, stamp duty etc)(
- Build cost (builders quote, demolition etc)
- Professional fees (architect, town planner etc)
- Council fees
- Finance costs (interest, valuation etc)
- Marketing costs (agents commission, advertising etc)
- Holding costs, taxes (rates, GST etc)
Because this is a crucial step, you need to make sure that the results of your calculation are accurate. That is why at Property Mastermind, we have developed a Financial Feasibility Template that will help you figure out whether a project can provide you the expected returns. This easy-to-use template will show you whether there’s enough profit in the deal or whether you should move on and look at something else.
Comprehensive Financial Feasibility Program from Property Mastermind
Conducting a feasibility study for your project can be a real challenge if you are a beginner in this field. With a sizeable investment at stake, you can’t afford to make any mistake. If you want to be more confident in property development, you can learn from Property Mastermind’s training videos coupled with our very own financial feasibility program.
Remember, a property development feasibility is only valuable if you have done it right. With the guidance from Property Mastermind, you will start your career in property development like a pro!
For inquiries, call Property Mastermind on 1300 729 550 or send email to firstname.lastname@example.org.