What a feasibility study actually decides
A property development feasibility study exists to answer one question before you are committed to it: what is this site worth to me, given what I can build on it and what it will cost to get there? Everything else in the study is machinery for producing that answer and for showing someone else how you got it.
The three decisions it supports are whether to keep looking, what to offer, and whether anyone else will fund it. Those are different questions with different tolerances for being wrong, which is why a study has depths rather than a single correct form.
Three depths, and knowing which one you are doing
The commonest mistake is not using the wrong numbers. It is using preliminary numbers to make a detailed decision, and not noticing the substitution.
Five numbers and the stated defaults. Land, yield, an average sale price, a construction rate and a programme. It answers one question — is this worth a day of work — and it should take minutes.
Every cost line entered rather than defaulted, GST method chosen against the land, duty on the right state schedule, and a programme the finance is actually computed on. This is the one that decides a price.
Everything above, plus a month-by-month cashflow, drawdown and repayment against a facility, sensitivity on the assumptions that move it, and a statement of where each input came from. A lender is underwriting your assumptions, not your optimism.
What goes in
Six groups. The order matters less than the discipline of deciding each one rather than letting it default.
| The site | Purchase price, area, zone and overlays, and the yield the planning controls actually support — not the yield that fits on a napkin. |
| Revenue | Unit mix, sale prices per type, and when each settles. Sale price is the assumption with the most power over the answer and usually the least evidence behind it. |
| Construction | A rate per dwelling or per square metre, demolition, site works, and a contingency that is a decision rather than a habit. |
| Professional and statutory | Design, engineering, surveying, planning and building permits, council contributions, headworks. These default to zero in most models and stay zero. |
| Finance | Loan-to-value, interest rate, establishment fees, and the term the interest is computed over — which must be the programme, not a round number. |
| Tax and duty | Stamp duty on the acquiring state's schedule, and GST on either the margin scheme or the full method depending on whether the land qualifies. |
What comes out, in plain language
Net revenue less total development cost. The number everyone quotes and the one that says least on its own, because it is silent about how much you had to put in to get it.
Profit as a percentage — of cost, or of revenue. These are different numbers on the same deal, and the difference is not small. See below.
What the land can be worth if the scheme is to hit your target margin. Solve for it and you have a price ceiling rather than an opinion about one. The public calculator does not publish it yet — it is withheld pending a methodology review — so this guide explains the idea and quotes no residual figure.
Profit against the cash you actually put in, rather than against the project. Gearing moves it while the project stays identical, which is exactly why lenders and equity partners ask for it.
Profit divided by total cost, and profit divided by net revenue, are both called “the margin”. On the deal below they read 17.0% and 14.5%. Two studies of the same site can differ by 2.5pt with nobody making an error, purely from the denominator each author chose. State which one you used.
A worked example, computed rather than illustrated
6 townhouses in Victoria over an 18-month programme. These inputs were run through the calculator’s own endpoint, the same code the calculator on this site calls; the figures below are its output, not a worked illustration. Everything the deal does not state is left at the calculator’s stated defaults, listed under the cost stack.
Net profit$1,010,282
Margin on cost17.0%
Margin on revenue14.5%
Equity required$1,428,582
The inputs
| Land price | $1,650,000 |
| Dwellings | 6 townhouses |
| Average sale price | $1,250,000 |
| Construction, per dwelling | $520,000 |
| Programme | 18 months |
| Duty state | Victoria |
The cost stack
| Land | $1,650,000 |
| Stamp duty | $90,750 |
| Acquisition costs | $24,750 |
| Construction | $3,120,000 |
| Professional fees | $374,400 |
| Contingency | $156,000 |
| Marketing | $75,000 |
| Selling costs | $150,000 |
| Holding costs (land tax, estimated) | $15,750 |
| Finance fees | $63,421 |
| Interest | $237,829 |
| Total development cost | $5,957,900 |
Assumptions left at their defaults
| Loan to value (of gross realisation ex GST) | 65.0% |
| Interest rate | 7.50% |
| Finance fees | 1.50% |
| Professional fees, on construction | 12.0% |
| Contingency | 5.0% |
| Marketing, on gross realisation | 1.0% |
| Selling costs, on gross realisation | 2.0% |
| Acquisition costs, on land | 1.5% |
| Target margin on cost | 20.0% |
| GST | Margin scheme |
The deal leaves holding costs blank, so the engine estimates them and labels the figure “estimated”. It is land tax only: about $10,500 a year on the $1,650,000 land price, taken over the 18-month programme — $15,750. State Revenue Office Victoria — Land tax current rates (sro.vic.gov.au, updated 20 Jul 2026), 2024–2033 land tax years; VIC general rates, the land price standing in for the taxable value, assessed as the owner's only holding. It is not this site’s assessment. Council rates (no council was supplied) and utilities are not estimated; enter your own holding cost and it replaces the estimate outright.
The deal returns 17.0% on cost — a profit of $1,010,282, which most people would call healthy and stop there. But the calculator screens against a 20.0% target margin on cost, and this deal sits 3.0pt short of it. Both statements are correct. The margin says the project works; the target says it does not work well enough at a $1,650,000 land price. Turning that shortfall into a price is what the residual land value is for — the land price at which the scheme just reaches the target — and it is the reason to do a feasibility study rather than a rule of thumb. The public calculator does not publish a residual figure yet, so we quote none here.
Sensitivity: which assumption actually decides it
Move one input at a time and watch the profit. On this deal the two candidates are construction cost and sale price, and they are not equally dangerous.
| Change | Construction cost moves | Sale price moves |
|---|---|---|
| −10% | $1,375,322 · 24.6% | $380,440 · 6.4% |
| −5% | $1,192,802 · 20.6% | $695,361 · 11.7% |
| base | $1,010,282 · 17.0% | $1,010,282 · 17.0% |
| +5% | $827,762 · 13.5% | $1,325,203 · 22.1% |
| +10% | $645,242 · 10.2% | $1,640,124 · 27.3% |
Net profit · margin on cost.
A ten per cent construction overrun costs 36.1% of the profit. A ten per cent fall in sale price costs 62.3%. Revenue risk dominates, and it is the one a developer controls least — which is an argument for getting price evidence before a cost plan, and the opposite of where most contingency effort goes.
Quality control, before it leaves your desk
| Is every zero a decision, or an empty field? Demolition and statutory fees default to nothing and stay nothing. Holding costs default to an estimate of land tax only — council rates and utilities are still yours to enter. |
| Does the yield come from the planning controls, or from what fits on a napkin? |
| Is GST on the margin scheme or the full method, and does the land qualify for the one you picked? |
| Is duty on the right state schedule? A Victorian schedule applied to a Queensland site is a silent five-figure error. |
| Does the programme match the finance term the interest was computed on? |
| Is the reported margin on cost or on revenue, and does the reader know which? |
| Has one assumption been moved to see what happens, or does the study describe only the case where you are exactly right? |
| Could someone else open this and see where each number came from? |
Four ways a feasibility study goes wrong
Every other input is researched and this one is assumed. It is also the input the answer is most sensitive to, as the table above shows. Get price evidence before you get a cost plan.
Five per cent because it is always five per cent. A contingency should reflect what is actually unknown on this site — an unresolved planning pathway is not the same risk as a signed fixed-price contract.
Interest computed on a twelve-month term for an eighteen-month build understates cost and overstates profit, and it does so quietly, because nothing in the output says which term was used.
One reports margin on cost, the other on revenue, and nobody says which. On the deal above those are 17.0% and 14.5% — 2.5pt apart on identical numbers, purely from the author's choice of denominator.
If your study lives in a spreadsheet, three of these four are structural rather than careless — which is a separate question worth its own answer.
Run these numbers on your own deal
The calculator on this site uses the same engine that produced every figure above. Five inputs, no account, and every assumption listed and editable.