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What Factors Are Included in a Detailed Financial Feasibility Model? Your Project's Financial DNA
- Chris Doolan
- Dec 14
- 4 min read
Updated: Dec 23
In the intricate world of property development, intuition and ambition alone are insufficient. Every significant decision, from land acquisition to final sales, must be underpinned by rigorous financial analysis. This is where a detailed financial feasibility model becomes indispensable – it is the quantitative heartbeat of your project, meticulously projecting every monetary inflow and outflow over its entire lifecycle.
Far more sophisticated than a simple profit-and-loss statement, a detailed financial feasibility model is a dynamic, multi-layered projection tool. It is designed to simulate the financial journey of a development, uncovering its true profitability, cash flow requirements, and inherent risks under various scenarios. For developers, investors, and lenders alike, it serves as the ultimate financial truth serum, transforming speculative ideas into a clear, data-driven investment proposition.
Let's delve into the myriad of factors meticulously included in a comprehensive financial feasibility model, providing a granular view of your project's financial DNA.
Meet the Founder: Chris
My name is Chris Doolan, and I founded CADDACorp after two decades in property and construction, focusing on Development Management. I believe the financial viability of any project is its most important pillar. Our approach is to leverage industry-standard software like ARGUS EstateMaster to construct detailed financial feasibility models that capture all aspects of the project's financial DNA, from complex Queensland Infrastructure Charges to detailed Internal Rate of Return (IRR) analysis. This rigorous, transparent modelling is the foundation upon which all successful strategic and execution decisions are built.
A comprehensive model is built upon several interconnected pillars, each capturing a critical aspect of the project's financial journey.
1. Revenue Projections (The Income Side)
This section forecasts all anticipated income generated by the development.
Gross Realisation Value (GRV): The total expected income from sales or capitalised rental income.
Sales Revenue: Includes a detailed breakdown of the Unit/Lot Mix & Pricing (derived from rigorous market analysis) and crucial assumptions regarding Absorption Rates/Sales Velocity (how quickly units will sell).
Australian Context: Models must account for GST Treatment, including the potential application of the Margin Scheme for residential property sales, which significantly impacts net revenue.
Rental Revenue (for income-producing assets): Includes achievable rental rates, vacancy rates, and capitalisation rates for valuation.
2. Cost Projections (The Expenditure Side)
This is a comprehensive breakdown of every anticipated cost, from acquiring the land to selling the final product.
Land Acquisition Costs: Purchase price, Stamp Duty (a significant state-based tax), and associated legal fees.
Construction Costs (Hard Costs): Direct costs of building, including the Base Build Cost, Site Works, Demolition, and a Construction Contingency (e.g., 5-10%) for unforeseen construction issues.
Soft Costs (Indirect Costs): Often underestimated, these include:
Professional Fees: Architects, engineers, Quantity Surveyor, and Project Manager.
Statutory Fees & Charges: Crucially, Infrastructure Charges/Developer Contributions (such as those tied to Local Government Infrastructure Plans - LGIPs in Queensland), which can be substantial and must be precisely modelled.
Holding Costs: Ongoing expenses during the development period (e.g., Rates, Land Tax, Insurance).
Finance Costs: Interest on loans, facility fees, and lender establishment fees.
Overall Project Contingency: A higher-level allowance (e.g., 10-15% of total costs excluding land) for broader project risks.
3. Financing Structure (The Capital Stack)
This defines how the project will be funded and aligns with the strategic guidance needed to secure partners.
Equity Contribution: The developer's own capital investment.
Debt Funding: Detailing the Loan-to-Cost (LTC) / Loan-to-Value (LTV) Ratios, interest rates, and Drawdown Schedules.
Pre-Sales Requirements: The percentage of pre-sales the lender will require before releasing construction finance, a crucial factor for residential projects.
4. Cash Flow Projections (The Dynamic Heart)
The dynamic heart of the model, showing money in and out over time, is essential for liquidity management.
Timing of Inflows and Outflows: A month-by-month or quarter-by-quarter breakdown of all revenues and expenditures.
Peak Debt: The maximum amount of debt required at any one time, a critical metric for lenders.
Cumulative Cash Flow: Tracking the project's liquidity position throughout its lifecycle.
5. Financial Metrics & Returns Analysis (The Outcome)
These are the key outputs that dictate viability and attractiveness to investors.
Internal Rate of Return (IRR): Project IRR and Equity IRR – the annualised effective compounded return rate.
Net Present Value (NPV): The difference between the present value of cash inflows and outflows, discounted at a specific rate.
Return on Cost (RoC) / Development Margin: Profit generated as a percentage of total project costs.
Return on Equity (ROE): The return generated specifically on the developer's equity contribution.
6. Sensitivity & Scenario Analysis (Risk Management)
This is crucial for understanding risk and project resilience.
Sensitivity Testing: Systematically varying key inputs (e.g., sales price by -5%, construction cost by +5%, interest rates by +1%) to observe their impact on the project's profitability. This ensures the model is used as a strategic decision-making tool, which is a core function of the Development Manager, contrasting with the execution focus of a Project Manager. We expanded on this distinction in our previous post: Development Manager vs. Project Manager: Who Leads Your Australian Property Project?.
Scenario Modelling: Developing 'best case', 'worst case', and 'most likely' scenarios to understand the full range of potential outcomes.
Your Project's Financial Blueprint for Success
A detailed financial feasibility model is the ultimate quantitative roadmap for any property development. By meticulously capturing and projecting every revenue stream, cost component, financing structure, and tax implication, it unveils the true financial DNA of your project. This level of detail is paramount for de-risking your investment, securing essential funding, optimising profitability, and navigating the complexities of the market with clarity and confidence. It transforms guesswork into strategic certainty, providing the critical insights needed to turn your vision into a financially successful reality.
If you are embarking on a development project and require a meticulous and robust financial feasibility model to guide your decisions and secure your investment, our expert team is ready to assist.
Reach out to CADDACorp to explore how our integrated feasibility modelling and advisory services can empower your next venture.
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