Property Development Feasibility: The Numbers You Need Before You Buy

Every property development success starts with one question: will the numbers work? Whether you're building a granny flat, dual occupancy, or subdivision, understanding feasibility is what separates profitable projects from expensive mistakes.

Here's the simple framework professional developers use — and how to apply it to your project.

The Basic Feasibility Formula

Development Margin = (End Value − Total Costs) ÷ Total Costs

Professional developers typically target a 15–20% margin as their minimum. Below 15%, the risk usually outweighs the reward.

Step 1: Calculate Gross Realisation (End Value)

This is what your completed development will sell for. Be conservative — use recent comparable sales, not agent estimates.

Example — Dual Occupancy:

• House 1 (3 bed): $950,000
• House 2 (2 bed): $780,000
• Total Gross Realisation: $1,730,000

Step 2: Calculate Total Costs

Most first-time developers underestimate costs by 20–30%. Here's the complete list:

Acquisition Costs

• Purchase price
• Stamp duty (approx 4–5.5% depending on state)
• Legal/conveyancing: $1,500–$3,000
• Building inspection: $500–$800

Holding Costs (Budget 12–18 months)

• Mortgage interest on land
• Council rates
• Insurance
• Land tax (if applicable)

Professional Fees

• Town planner: $3,000–$8,000
• Architect/draftsman: $8,000–$25,000
• Engineer: $2,000–$5,000
• Surveyor: $1,500–$3,000
• BASIX assessor: $500–$800
• Contamination/acid sulfate reports (if required): $2,000–$5,000

Construction Costs

Use $2,000–$3,500 per square metre depending on quality and location. Don't forget:

• Demolition: $15,000–$40,000
• Site works (retaining, excavation): $10,000–$50,000
• Landscaping and driveways: $15,000–$40,000
• Contingency (10–15% of construction): essential

Approval and Compliance Costs

• DA/CDC fees: $2,000–$10,000
• Section 7.11 contributions (formerly Section 94) (varies by council): $10,000–$40,000
• Water/sewer headworks: $5,000–$25,000
• Construction certificate: $1,500–$3,000
• Occupation certificate: $1,000–$2,000

Selling Costs

• Agent commission: 1.5–2.5%
• Marketing: $5,000–$15,000
• Staging (if selling vacant): $3,000–$8,000

Step 3: Calculate Your Margin

Example — Dual Occupancy Development:

Gross Realisation	$1,730,000
Land purchase ($900k + stamp duty $35k)	−$935,000
Holding costs (12 months)	−$45,000
Professional fees	−$25,000
Construction ($650k + $100k site works)	−$750,000
Approvals and contributions	−$35,000
Selling costs (2% + marketing)	−$50,000
Total Costs	$1,840,000
Project Profit/Loss	−$110,000

This deal loses money. You'd need to either buy the land for ~$750k, build for ~$550k, or sell for ~$2.1m to make it work.

Step 4: The Sensitivity Test

Before committing, test what happens if:

• Construction costs blow out by 15%?
• Timeline extends by 6 months (more holding costs)?
• End values drop by 10%?
• Interest rates rise another 1%?

If your project still works under these scenarios, it's likely a safe bet. If not, reconsider.

Quick Feasibility Rules of Thumb

• Granny flat: Build cost $180k–$250k. Must rent for $400+/week or add $200k+ to sale price.
• Dual occupancy: Combined end value should be 1.6–1.8x total costs.
• Subdivision: Each new lot should be worth 40–50% more than its share of acquisition + costs.

When to Walk Away

Not every site is a development opportunity. Walk away if:

• You can't achieve at least 15% margin conservatively
• The site has multiple constraints (flood + bushfire + heritage)
• Comparable sales don't support your end value
• You'd need to sell in a falling market

The best developers say "no" to 90% of opportunities. Patience and discipline beat optimism every time.