Before a property developer builds anything, they should run a feasibility analysis.
This is simply a set of numbers that answers one big question: “Does this project actually make money?”
Think of it like planning a small business.
Unfortunately, many developers make mistakes when they run their feasibility. These mistakes can turn a good project into a very stressful one.
Here are the five most common mistake we see.
1. Forgetting major costs
One of the biggest mistakes developers make is missing costs in their feasibility.
There are many moving parts in a development project, including:
Professional fees (architects, engineers, planners)
Council fees and development contributions
Subdivision costs
Legal and consultant fees
Marketing and sales costs
Finance costs
If even a few of these are missing, the numbers can look much better than reality.
A project that looks profitable on paper may suddenly lose money once all the real costs appear.
2. Being too optimistic about sale prices
Another common mistake is assuming the finished homes will sell for more than the market will realistically pay.
Developers sometimes look at the highest sale in the area and assume their project will achieve the same price.
But lenders and experienced developers usually take a more conservative view.
It’s safer to assume slightly lower sale prices so there is a buffer if the market moves.
3. Not allowing for contingencies
In property development, things rarely go exactly to plan.
Construction costs might increase.
Unexpected ground works may appear.
Projects can take longer than expected.
That’s why most lenders expect developers to include a contingency allowance, usually around 10% – 15% of construction costs.
Without a contingency, even a small problem can create a large financial gap in the project.
4. Not factoring in finance costs
Money isn’t free.
When lenders fund a development, there are usually several finance costs involved:
Capitalised Interest
Line fees
Establishment fees
Broker fees
Legal costs
These can add up to hundreds of thousands of dollars even on small projects.
If finance costs are underestimated, the project’s profit margin can shrink quickly.
If you are not sure how to calculate finance costs - feel free to reach out to us or speak to a finance broker of your choice.
5. Project margin is too small
This is one of the mistakes lenders worry about the most.
If a project has a very small profit margin, there is almost no room for error.
Construction costs could rise.
Sales prices might drop.
The project might take longer to sell.
Most lenders like to see a profit margin of 20% or more of the total development cost.
This buffer helps protect both the developer and the lender if things don’t go perfectly.
Why getting the feasibility right matters
A feasibility analysis is really the story of the project told through numbers.
If the numbers are wrong, the story becomes misleading.
Getting the feasibility right helps developers:
Understand whether a deal actually works
Avoid unexpected financial surprises
Increase their chances of securing development finance
Because in property development, good projects start with good numbers.