Property Development Assessment is like a business plan and a document that not only helps you reduce risk, but will also help you in obtaining finance for your property development project. More importantly, it will make you and your financier feel more confident in your ability to succeed in the venture. Feasibility study is an area of property development where most developers make a mistake. Generally their feasibilities leave out a number of costs, which they are not aware of. Your property development manager must understand all the cost elements in the type of project you are proposing and what are reasonable estimates for those cost elements.
A financial feasibility analysis or property development assessment determines the financial viability & profitability of a venture. A study of this nature must include, among other things, the goals for the project, a description of the project and the expected return. Preparing a comprehensive study takes a considerable amount of time & effort, but once completed, serves as a project guide, not only for the developer but also for the development team. In preparing the property development feasibility study you will gain the following benefits:
- Preliminary property development feasibility study – This is the most important aspect and it is imperative that you are able to ascertain if your deal stacks up. This pre property development assessment will determine an approximate profit and will save you from wasting your time, efforts & money.
- Concept Testing – Cost overruns can cripple a property development project. A systematic property development assessment allows you to make mistakes on paper, rather than when the project is completed.
- Confidence – A thorough feasibility study will increase the developer’s confidence in his or her ability to proceed with the development. Sometimes, it may even compensate for a lack of experience if the concept is sound and there is good demand for the end product you are developing.
- Finance – property development feasibility show the level of finance required and for how long. Under capitalization and early cash flow problems in a project are two major reasons new developments fail. Feasibility analysis also allows you to convey your ideas to bankers & potential investors, and help them to understand & appreciate the reasoning behind these ideas.
Usually a preliminary property development feasibility study is done on a ‘per lot / per unit’ basis where by the profits and expenses are bifurcated on individual property basis. For example, when deciding to purchase the site for 10-townhouse development for $2m, $200,000 will be thought of as the price paid for land content for each townhouse.
It is advisable that a development manager or quantity surveyor performs the property development assessment, as they are involved in real estate development every day of the week. Financial feasibilities are an evolutionary process. It is extremely rare for the initial financial feasibility to exactly mirror the final outcome. There are many variables in property development and to keep the financial feasibility current it needs to be updated every time a variable changes.
Positive Property Pro can help with your Property Development Assessment & financial feasibility, so you can be rest assured that the project is worth pursuing.