Feasibility studies: a crystal ball for property investors

The lifting of Covid rules this week comes as a breath of fresh air to us all – and a sign, we hope, of a more positive year ahead.

It is likely to be a significantly more expensive one, too, however, for many households, given inflation rising at its fastest rate – up 5.4% in December 2021 – in nearly 30 years. Our every day costs, from food shops to heating bills, are rocketing, and the Bank of England is under pressure from economists to increase interest rates to curb such rampant inflation.

For investors, this is not good news. The costs of labour, materials and development are going up which only puts more pressure on your returns – so you need to have the best possible advice early on.

As any property investor knows, uncertainty is never good for business. It may throw up some good buying opportunities – but such turbulence in the market and nervous end-buyers are never the best recipe for a good night’s sleep when you are investing heavily in a project.  

There is a way, however, for anyone who is considering developing a property to minimise the fear of the unknown – and that’s to do a feasibility study.

Why are feasibility studies crucial for a successful project?

How do you know whether the development you are considering is even viable, let alone profitable? You wouldn’t launch a new enterprise without drawing up a business plan or try to sell a new product without a marketing plan. It’s the same with a property development. With a feasibility study, you can break down a complex project into smaller parts to assess the risks, understand the costs and establish a realistic timeframe. 

You may have a perfectly viable property development, but it can fail simply due to bad planning. Developing a property is a complex task. Finding a property you like is merely the start of it. Whether this is your first property development or your hundredth, and whether you’re planning a single property or a large-scaled multi-unit development, detailed planning should underpin every step of the way to make sure the project runs as smoothly as possible.

What does a feasibility study do?

Well, it’s the best way to ensure you have the proper tools and resources to make the most out of your development and gain the maximum returns.

First of all, a feasibility study will assess the approximate cost for the entire project – so you can weigh up whether it’s worth it to you to go ahead, or not. It will also flag up any costs that could overrun, whether that’s acquisition overlays, development approvals, conveyancing, or legal, operational, construction and eventual selling costs. A study like this digs deep into your project, to analyse your aims and determine the necessary levels of risk and budget. Undetermined costs can cripple projects, so you need to be aware of any mistakes that could happen during development, and what an overrun will mean financially.

Next is the timeline. You have an overall budget for your project, but how long does it need to last? And what will be the financial implication of delays if there are cash flow problems early on? Understanding your cash flow for the duration of your project is crucial – especially if you have finance in place while the development is underway. Mis-calculating your timeframe won’t just make things a bit pricier; it can entirely eliminate your return.

And – here’s where the crystal ball comes in – feasibility studies are a great way to help you predict the unpredictable. They can tell you if a project is going to be profitable. And they show you how to reduce risks, such as the suitability of the site for your proposed property, or the quirks involved in the planning process. They will also help you understand legal and regulatory approvals so that your project doesn’t experience any unforeseen delays. Have you factored in objections from neighbours, for example, and how that will affect your timeline? With the expertise of a company such as Rive Gauche, you will be equipped to deal with any possible hurdle. The magic ingredient we provide is – in addition to our understanding cost and timeline – our in-house design expertise and capability, which enable us to unlock property potential early on, and then assess costs and timeframes.

For investors dealing with a large-scale project, a feasibility study can also be vital in helping to secure stakeholders and funding. Think of it as a confidence-building exercise. It shows you have taken the time to consider each step of your development, and it will help you reduce the risk of investing in properties or land that are incapable of returning a profit on investment, which you and your investors will want to know.

A feasibility study isn’t set in stone from the outset either. It’s a moveable feast – something that adapts as the project progresses – and that’s another reason why you should conduct one early on in the project.

Who do you choose to help you?

You need a company who understands your requirements and ambitions – and one who has the skill and experience to follow through, design and execute your project, with experienced surveyors who can give you a detailed overview of your project’s expectations. At Rive Gauche, we work with our clients closely to understand their needs, project desires and budget.  You, as the client, remain fully in control of your investment. And you have the benefit of Rive Gauche’s 360 degree approach and expertise from design to delivery.

Ultimately, the difference between those chancing their luck – and those who are serious in their property development – lies in doing a feasibility study. Whoever you choose to help you with this, ask to see case studies of their work and ask about their experience of property developments. Also request a quote and further information on what feasibility study options they can provide for your project. 

As a starting point, get in touch with the team at Rive Gauche and request a feasibility study for your next project.