Property Development Feasibility Template (Australia, Free)

A property development feasibility template needs to ask one single question before any contract is signed: Does the margin stand up to the evidence? The majority of free templates come in one sheet with one margin which looks best in the first instance when data is limited to the first day.

This guide will use three versions of the template, each with a different decision: to screen the site, to make an offer, and to show the numbers to a lender. It will then run a hypothetical project through all three versions to reveal the margin drift as the evidence builds. The project is two townhouses on a $900,000 site in NSW. All figures are from my best guess calculations, and in ex-GST dollars in the worked example. The ranges are from Feasly, a software provider; a Melbourne mortgage broker; and Landchecker, a property data provider. All three sell products or services so the figures are marked as indicative. This information is general and does not constitute tax, legal or financial advice.

Property Development Feasibility Template: Which Version Fits Your Decision

Feasly recommends a staged feasibility method, starting with a quick screen, moving onto paid due diligence, and then onto a firm estimate with a builder's assessment, or quantity surveyor (QS) cost plan. These three steps have been made into three different editions of one template.

The kill rules relate to individual margins against the ranges shown below. 15%-20% of GDV is pretty standard, and 20% is probably a good goal for new investors. Broker thinks probably 18%-20% is the minimum we need to get to to open up non-bank lenders. So a site could achieve version 1 but fail at version 3.

Property Development Feasibility Template Version 1: The Screen

Version 1 needs about ten minutes. It uses six cost lines and no paid inputs. Copy the following block in a spreadsheet.

The 25% allowance is a personal assumption. Feasly places professional fees at 8% to 15% and contingency at 10% to 15%, with councils and funders adding their contributions on top. For the project illustration we used 2 x $1,400,000 townhouses with a GRV of $2,800,000. Transfer duty in NSW on $900,000 is $34,687 per the Revenue NSW table. Build costs are 320 m2 at $2,800 for a total of $896,000. Finance is a $115,000 placeholder.

Total costs = $2,239,687. Profit = $560,313 (25.0% margin on cost, 20.0% margin on revenue). Important to be clear which you are using as a denominator! Feasly proves the conversion: 20% margin on cost implies more or less a 16.7% on revenue, but 20% on revenue must equivalent a 25% margin on cost. Most funders look at margin on cost, so tellers might want to leading with that.

Property Development Feasibility Template Version 2: The Offer Sheet

Version 2 replaces the 25% allowance with actual cost lines. It also adds due diligence results that affects those lines.

Landchecker's list of what's required is: title and easements, zoning, development approvals, environmental assessment, heritage, services and tax. No author or date is provided in the checklist and flooding is missing. Planning overlays only appear on the navigation menu, so both will need to be included in a personal list. There is one suggestion for each finding.

In the example, fees are as follows: legal – $8,000; contribution – $25,000; upgrade & soil test for services – $24,000. Fees are 10% of build and contingency is 10%. Total costs are then $2,251,887 and the margin is 24.3% on cost. Version 2 has little impact on this and should be reassuring to the reader.

But there is a danger in providing reassurance after all, the build line is still an estimate!

Property Development Feasibility Template Version 3: The Lender File

Version 3 moves from estimates to firm quotes. The broker details what the lender needs: a planning permit or approval, an independent QS cost report (cost: between $3,000 and $10,000), a fixed-price contract with a licenced builder, a capability statement, and an exit plan. Presales are key. Major banks require presales to fund the full amount of the loan; some non-bank lenders are OK with 30% to 50%.

Say the QS report shows 6% over the original estimation. Your build costs will be $949,760. Your contingency is also now in the 10-20% bracket your broker said previous developers held, and is set at 12%. Your finance costs are now $125,000, as the program will take longer; and you've also paid another $6,000 for the QS report and yet another soil test.

A feasibility margin is not fixed. It falls as evidence arrives.

The move from Version 1 to Version 3 alone causes a reduction of 5.9% or $111,707 of profit. This should not be mistaken as an error but instead as the project's move into the realm of reality. A template limited to Version 1 is unable to show this.

Next up is the equity. From the broker's recommendation, one may expect to pay 25% to 35% of the Total project cost. For the $2,351,394 expenditure, it equates to $587,849 – $822,988. It is worth to look at the cash up-front, in order to help understand the margin.

Property Development Feasibility Template Stress Grid: Where the Margin Breaks

Version 3 ends with the option of a stress grid. Feasly suggests a standard adjustment to costs and end values ranging between 5% and 15%, with 10% as the most common adjustment. In addition, Feasly suggests that when the estimate is provided without a QS figure, the ranges should be wider. A grid below shows a simultaneous adjustment of Total Cost & Gross Realisation Value (GRV). Feasly relates selling costs to GRV adjustments.

Read the first row of the grid. When sale prices fall by 3.6%, the margin diminishes to less than 15%. When falling by 16.5%, profit disappears. In first column, when there is a cost overrun of 5% the margin gets to 13.6%.

Contingency is also critical here, but only if you leave it. If the 12 per cent contingency has been spent on fixable problems, the grid provides a stark reminder of the monetary cost of the outlying costs. Use the date from realestate.com.au or domain.com.au as a benchmark rather than RP Data, which is three or more months behind.

When a Feasibility Spreadsheet Is Enough, and When It Is Not

A feasibility spreadsheet is good at managing Version 1. It can also be used for Version 2 if only one person is writing in the document. However, Feasly says that spreadsheets are good for contained projects, like two or four units on a single title with traditional financing and one maintainer.

But the strain is visible in Version 3. Feasly highlights common issues including formula errors in significant cells, Version proliferation spread by email, lack of an audit trail for altered assumptions, and the danger of key staff. A story is told of a $247,000 GST-credit error in one hardcoded cell, though there is no way to verify this vendor tale. However, the story does fit the pattern suggested by the Version 3 table in which many inputs, each with its own margin, appear.

Feasly recommends abandoning the use of spreadsheets when you're running three or more sites, handling staged funding or joint ventures, or reporting to investors. This list is a recommendation, not a requirement. A feasibility spreadsheet with formulas secured and one main file can sustain a small project for a significant period of time.

How FlipSync IQ Supports Your Property Development Feasibility Template

Keep the scope crystal clear. Flip Sync IQ is only for flips, renovations, and Buy, Rehab, Rent, Refinance, Repeat (BRRRR). Its Financial Analysis engine is a Cost Library (Purchase, Holding, Selling, Renovation) with a few custom items. It does not appear to support multi-lot development; therefore, use the above templates for these, and employ Flip Sync IQ for the rehab.

For flips, the deal analyzer performs an ARV simulation with successive maximum purchase prices to reverse calculate the ceiling. Margin protection is on. Basic deal planer allows for unlimited quick deal analyses and 3 detailed feasibility analyses, per product page. After purchase, budget to actual comparisons reveal red and green variances on each line, and receipts, invoices, and staged payments are recorded against the budget. Calendar based tracking of holding costs, and the Investor Package Report compares sale comps and potential equity splits among financial partners.

Use the Property Development Feasibility Template in Order

Proceed with Version 1 to all sites. Only go to Version 2 once the screen hits kill rule. Only go to Version 3 once the offer sheet is good. Each one costs more than the last, so you are protecting your money as well as the margin.

You can keep a spreadsheet for the screen and the offer sheet if you like. Keep formulas locked, only have one master file and date all exports. When the lender file is received ask if a spreadsheet always keeps a trail. Try a free Flip Sync IQ and compare a tracked budget with your spreadsheet. When the margin is moving and why it is so, then a property development feasibility template is warranted.