Preliminary Feasibility Study: A Beginner's First-Pass Guide

Before a developer spends a dollar on a site, they run a rough sum to see whether the project is worth chasing at all. It goes by a lot of names. You might hear it called a preliminary feaso, a rough feaso, a quick feaso, or a back of the envelope feaso. In Australia it is often affectionately called the beer coaster feaso, because the maths is meant to be simple enough to scribble on a coaster while the numbers are still fresh. Whatever you call it, the job is the same: a fast first-pass test that tells you whether a site stacks up before you commission expensive reports or sign anything.

This guide is for someone new to property development who wants to understand what a first-pass feasibility study is, what information goes into it, where to find that information freely or cheaply, and which professionals get involved at which stage. The aim is a clear go or no-go signal. A beer coaster feaso may not be precise, but a good one is honest about its assumptions and conservative enough that the project still survives once the real numbers arrive. If you want the longer-form version once you have done your first pass, the property development feasibility guide covers the full discipline in detail.

What a preliminary feaso actually is, and what it is not

A preliminary feaso is a screening tool. It exists to kill bad deals quickly and cheaply, and to flag the handful of sites worth deeper work. It typically rests on assumptions rather than verified figures, and that is fine at this stage, as long as every assumption leans conservative.

A first-pass feaso may take an hour. A full feasibility study, the kind a lender or equity partner will want to see, may take weeks and rely on a builder’s estimate, a Quantity Surveyor’s cost plan, and an independent valuation. The two are not in competition. The rough feaso decides whether the detailed one is even worth doing.

The single most useful idea to carry through is this: at the preliminary stage you are not trying to be right, you are trying to be roughly right and safe. A project that only works on optimistic inputs is a project that does not work.

The staged go or no-go process

Most developers run the decision in three stages, spending more money only as confidence grows.

• Step 1, the quick feaso. Does it stack up at all on a handful of inputs? This step is free. It costs only your time. If the margin is clearly negative or wafer-thin, you walk away here and lose nothing.
• Step 2, paid due diligence. If Step 1 looks positive, you spend modest amounts to test the assumptions: a title search, a soil test, preliminary planning advice, a contract review. Most individual items at this stage range from a few hundred to a few thousand dollars.
• Step 3, firm up and formalise. If it is still stacking up, you sharpen every assumption, get a builder’s estimate or a Quantity Surveyor’s cost plan, and commission an as-if-complete valuation. This is the larger spend, and you only make it once the deal has survived the first two steps.

The discipline of staging is what keeps a beginner from burning capital. You never pay for Step 3 work on a site that failed Step 1.

The six must-haves for a first-pass feaso

A preliminary feaso reduces to six inputs. Each can begin life as an assumption and be sharpened later. If you cannot put a number against all six, even a rough one, you are not ready to run the sum.

1. The site

The address, the land size in square metres, and the zoning. Frontage and dimensions matter as much as raw area, because they drive what can physically be laid out. A long, narrow lot and a square lot of identical area can yield very different schemes. For a first pass you want the lot size, the zone, and a quick read on whether the shape supports the dwelling count you have in mind.

2. What can be built

A realistic dwelling yield. Even an assumption is enough to start, for example “three townhouses” or “a dual occupancy”. Sharpen it against the zone, any overlays, and what is actually getting approved nearby. New developers tend to assume the optimistic yield. The safer habit is to model the conservative yield first and treat anything above it as upside. The residential zoning regulations guide covers how density controls translate into realistic dwelling counts.

3. Land price (and the GST check that cannot be undone)

The purchase price, or the current value if you already own the land. This is usually the largest single input and the one you have the most control over, because it is negotiated.

There is a tax check that belongs here and nowhere else, because it has to be decided before you buy. Is Goods and Services Tax (GST) inside the price? Is the sale input-taxed? And critically, does the way you buy preserve the margin scheme on your eventual sale? The margin scheme lets you remit Goods and Services Tax (GST) on only the margin between your purchase and sale prices, rather than on the full sale price, which on a multi-dwelling project can mean a six-figure difference. Eligibility depends on how the land is acquired and must be agreed in writing before settlement. It is a before-purchase decision, not something you can fix afterwards. The GST margin scheme guide explains the eligibility traps in full, and it is worth reading before you sign a contract, not after.

4. Build cost

A rate per square metre, or a builder’s estimate if you have one, multiplied by a rough build area. At the preliminary stage a published per-square-metre rate is enough. The trap is using a rate that is too low for the product or the location. Townhouses cost more per square metre than a project home, and capital city builds cost more than regional ones. Current ranges are set out in the cost section below.

5. End value

The likely sale price per dwelling, taken from recent comparable sold prices, not asking prices. If you intend to hold rather than sell, you still need an end value, because it sets the asset’s worth, your development return, and your equity position. Asking prices reflect hope. Sold prices reflect the market. Always use the latter.

6. Project length

A rough duration, because time drives holding costs and finance. Even a guess to start, say eighteen months from purchase to final settlement, is enough to estimate interest, rates, land tax, and insurance over the life of the project. You can adjust it as the programme firms up, but leaving it out understates costs and flatters the result.

How the six inputs combine into a “stacks up” test

The six inputs feed two equivalent calculations. Both are simple enough for a coaster.

The development margin (also called margin on cost). Add up every cost: land, acquisition costs, construction, consultants, statutory fees, finance, and a contingency. That total is your Total Development Cost (TDC). Add up every sale price to get the Gross Realisation Value (GRV). Subtract the Total Development Cost (TDC) from the Gross Realisation Value (GRV), and what remains is profit.

The headline figure developers and lenders watch is the margin:

Development margin = Profit divided by Total Development Cost (TDC), expressed as a percentage.

The residual land value. This is the same maths run backwards to answer a different question: what is the most I can pay for the land? Start from the Gross Realisation Value (GRV), subtract all costs and your required profit, and what is left is the maximum land price the deal can bear. This is the acquisition framework, because it tells you what to bid. The residual land value guide walks through the method, and the residual land value calculator runs the sum for you.

What margin signals a project stacks up

There is broad agreement across the profession on the rough threshold, so it is worth stating plainly. Most lenders and equity partners typically want to see a development margin of at least 15 to 20 per cent of Total Development Cost (TDC) before a project is worth pursuing. Below about 15 per cent, there is little buffer left once something goes wrong, and on a development something usually does.

The edges are where views differ. On larger or longer projects, such as apartment buildings or sizeable subdivisions, many lenders lift the requirement to 20 to 25 per cent, because more time means more risk. At the other end, a very small and fast project, such as a two-lot subdivision settling within months, may be acceptable to some developers from around 12 to 14 per cent. As a beginner, treat 20 per cent as your target and anything below 15 per cent as a reason to either renegotiate the land price or move on. The full benchmarking discussion sits in the building feasibility reports guide, which also explains how lenders assess the margin.

A worked beer coaster example

Here is a rough feaso of the kind you might scribble out in an hour. The figures are illustrative, assembled from current market benchmarks, and every line would need verification against the actual site. The point is the method, not the numbers.

The deal. A 900 square metre lot in a middle-ring capital city suburb, zoned for medium density. After negotiation, the land can be bought for $850,000. The conservative yield is four double-storey townhouses of about 150 square metres each. Recent sold comparables for similar new townhouses in the suburb sit around $850,000. Assume an eighteen-month programme from purchase to final settlement.

The revenue side. Four townhouses at $850,000 each gives a Gross Realisation Value (GRV) of $3,400,000.

The cost side.

The result. Profit is the Gross Realisation Value (GRV) of $3,400,000 minus the Total Development Cost (TDC) of $2,831,000, which is $569,000. The development margin is $569,000 divided by $2,831,000, or about 20 per cent.

That sits right on the 20 per cent target, a comfortable buffer above the 15 per cent floor. At a preliminary stage this is a project worth taking to Step 2 due diligence, though, as the stress test below shows, that buffer can thin out fast.

Why you stress-test before you commit

The reason a single margin figure is dangerous on its own is that the result moves sharply with small changes in the two biggest inputs, land price and end value. Run the same deal again with different assumptions:

• Upside. If end values lift 5 per cent to about $892,500 each, the Gross Realisation Value (GRV) rises to roughly $3,570,000 and the margin climbs to around 26 per cent. Comfortable.
• Downside. If construction costs come in 10 per cent higher and end values fall 5 per cent, profit drops to roughly $235,000 and the margin falls to about 8 per cent. The project is now marginal and arguably not worth the risk.

This swing, from comfortable to marginal on fairly ordinary movements, is the whole reason developers stress-test rather than trust a single number. The sensitivity analysis guide covers how to do this properly. The beer coaster takeaway is simpler: negotiate hard on land, verify end values against genuine sold comparables, and never let a deal rest on its best-case figures.

Where to source the information, mostly for free

One of the best-kept secrets for a beginner is how much of this information is freely available. A competent first-pass feaso can be built almost entirely from public sources, for the cost of a title search and your time.

Site, zoning and overlays: the free state planning portals

Every state and territory publishes a free online map showing a property’s zone and overlays. Start here for inputs one and two.

• Victoria. The VicPlan planning property report generates a free report showing the zone, overlays, schedules, and the responsible council, along with approximate dimensions.
• New South Wales. The NSW Planning Portal Spatial Viewer shows the in-force planning maps and overlays for any address.
• Queensland. The Queensland Government planning mapping covers state planning layers, alongside each council’s own development application mapping.
• South Australia. The South Australian Property and Planning Atlas shows zoning, overlays, the Planning and Design Code, and lodged development applications.
• Western Australia. PlanWA provides free planning, land, and heritage data, updated regularly.
• Tasmania. The Land Information System Tasmania (LIST) carries the equivalent mapping.
• Australian Capital Territory and Northern Territory. The ACT publishes ACTmapi, and the Northern Territory Planning Scheme is available online.

Title information and what it costs

A Certificate of Title confirms ownership and the legal description, and reveals easements, covenants, and restrictions. Ordering one is cheap, and it is the first paid step worth taking once a site looks promising.

Authorised brokers such as InfoTrack and Landchecker also sell title access at comparable prices, often bundled with other searches.

Comparable sold prices for the end value

For input five, you want recent sold prices, not listings.

• Free. The sold sections of realestate.com.au and Domain show what nearby properties actually transacted for. Most state Valuer-General offices also publish sales data, and propertyvalue.com.au offers free estimates with limited comparables.
• Cheap. CoreLogic, now trading as Cotality, sells property reports for around the cost of a coffee, and the report is often provided free through a mortgage broker or lender.
• Professional. Subscription tools such as Pricefinder and CoreLogic RP Data draw verified Valuer-General sales and are worth it once you are running multiple deals.

Pull five to ten genuine sold comparables from the past six to twelve months, adjust for differences in size and quality, and take a conservative midpoint. Resist the temptation to anchor on the one optimistic sale.

Build cost benchmarks

For input four, several published sources give per-square-metre rates by building type and city. Rawlinsons publishes the widely used Australian Construction Handbook and a Construction Cost Guide aimed at smaller projects, Rider Levett Bucknall publishes the Riders Digest, and the free BMT Construction Cost Table gives indicative per-square-metre rates by building type and capital city. For anything beyond a first pass, a Quantity Surveyor’s cost estimate is the next step up in accuracy.

Services and hazards

Before You Dig Australia, formerly Dial Before You Dig, runs a free service enquiry that returns plans showing water, sewer, power, gas, and telecommunications assets near a site, usually within minutes. A distant sewer connection or a required mains upgrade can be a major hidden cost, so this free check earns its place early.

Flood, bushfire (Bushfire Attack Level, or BAL), heritage, and vegetation overlays all appear on the same state planning portals listed above, and state heritage registers carry listed-place detail.

The professionals, and when each gets involved

A common beginner mistake is engaging the wrong professionals at the wrong time, either paying for detailed work too early or signing a contract before getting the right advice. The order matters.

Before purchase. Two professionals belong here, and skipping them is where beginners lose the most money.

• An accountant sets the ownership structure, advises on Goods and Services Tax (GST) registration, and frames the margin scheme strategy. All of this has to be decided before you buy.
• A property or conveyancing lawyer reviews the title, the contract, any easements or covenants, and the structure. Their fee is typically a few thousand dollars, and it is the cheapest insurance in the whole project.

As the deal firms up. A town planner advises on the planning pathway and pre-application strategy. A land surveyor produces a feature and level survey. An architect or building designer develops the scheme, with fees commonly running 5 to 15 per cent of construction cost for full services. Civil, structural, and geotechnical engineers come in at the design stage. A Quantity Surveyor prepares a cost plan for feasibility and finance, usually charging around 0.5 to 2 per cent of project cost. A building surveyor issues the building permit later on.

The principle is the same as the staged feaso: you bring in (and pay for) each professional only when the deal has earned the next layer of confidence. The how to become a property developer guide covers how to build the team over your first few projects.

Ownership, money and tax, with state nuance

This is the area where the rules vary most by state, and where the largest avoidable costs hide. The core principles are national, but the figures and surcharges differ across jurisdictions.

Ownership structure, decided before you buy

Whether you develop in your own name, through a company, or through a trust affects income tax, Capital Gains Tax (CGT), land tax, and your exposure to risk. A few points matter for a first-timer.

Most active development profit is taxed as ordinary income, on revenue account, which means the 50 per cent Capital Gains Tax (CGT) discount usually does not apply regardless of structure. Companies pay a flat company tax rate, can retain earnings to reinvest, and ring-fence risk, which is why a separate company per project is common. Trusts give flexibility in how profits are distributed and add a layer of asset protection. The most common default mistake is buying in your own name without thinking it through.

Whatever you choose, it has to be settled before purchase. Changing structure later means transferring the property, which triggers transfer duty a second time and may crystallise tax. There is no cheap way to fix the structure after settlement.

Land tax while you hold the land

Land tax is an annual cost on the unimproved value of land, and holding development land attracts it. Thresholds and rates vary widely.

• New South Wales. General threshold around $1,075,000, with a premium rate above roughly $6.5 million. Verify current figures with Revenue NSW.
• Victoria. One of the lowest thresholds, with land tax applying from $50,000 of taxable value, plus a temporary COVID-debt levy running to 2033. Most Victorian development land is taxed. See the State Revenue Office Victoria.
• Queensland. Threshold of $600,000 for individuals and $350,000 for companies and trusts. See the Queensland Revenue Office.
• Western Australia. Threshold of $300,000, with a separate metropolitan region improvement charge in the Perth area.
• South Australia. Threshold around $833,000, adjusted annually, with lower thresholds for land held in trusts.
• Tasmania. Threshold of $125,000.
• Australian Capital Territory. No threshold. Land tax applies to all residential investment land, assessed quarterly.
• Northern Territory. No land tax at all.

Foreign ownership

If any party to the purchase is a foreign person, three separate costs can apply, and they are large enough to erase a margin on their own.

Foreign Investment Review Board (FIRB) approval is generally required before a foreign person acquires residential land, with application fees that scale with value. From 1 April 2025 to 30 June 2029, foreign persons are generally banned from buying established dwellings, with limited redevelopment exceptions. Confirm the current position with the Foreign Investment Review Board, and see the FIRB approval guide for how it interacts with a development.

On top of approval, most states levy a foreign purchaser stamp duty surcharge, currently around 7 to 9 per cent depending on the state, with New South Wales the highest. The Australian Capital Territory and Northern Territory do not impose this surcharge. Several states also add an absentee or foreign owner land tax surcharge each year the land is held. Western Australia, South Australia, and the Northern Territory do not currently apply a foreign owner land tax surcharge.

Transfer duty and Goods and Services Tax

Transfer duty (stamp duty) is a large upfront cost levied by each state on the higher of price or market value, on progressive scales. It is not deductible but forms part of the Capital Gains Tax (CGT) cost base. Because the rates differ by state and change periodically, use the stamp duty calculator for an exact figure rather than relying on a rule of thumb.

On the Goods and Services Tax (GST) side, a developer is usually carrying on an enterprise and must register once turnover passes the threshold. Selling new residential premises is a taxable supply, while holding to rent is input-taxed, meaning no Goods and Services Tax (GST) on the rent but also no input-tax credits on construction. The margin scheme, covered in the GST margin scheme guide, can materially reduce the tax on sale, but only if it is set up correctly before purchase. All of this should be modelled, with an accountant, before you commit.

The site and the title

Once a deal passes Step 1, the title is the first document to scrutinise. The Certificate of Title confirms ownership and the legal description, and it carries the encumbrances that can reshape or kill a scheme.

Easements, such as a sewer easement or a right of carriageway, and restrictive covenants, such as a “single dwelling only” restriction, can quietly destroy a yield assumption. A covenant limiting the lot to one house turns a three-townhouse feaso into fiction. Check these before, not after, you go unconditional.

Confirm the dimensions and frontage, not just the area, because layout depends on shape. Assess any existing structures and the cost to demolish, which for a full house typically ranges from around $12,000 to $50,000, more for two-storey or complex sites. Anything built between roughly 1920 and 1990 is likely to contain asbestos, and removal can add several thousand dollars or more, with the worst outcome being asbestos discovered after work has started. Slope, soil, and possible contamination flag the need for a geotechnical report, usually around $1,000 to $3,000, and where contamination is suspected, a contaminated land assessment. Finally, check existing services for availability and capacity through Before You Dig Australia and the relevant utilities.

What you are allowed to build

Zoning sets the broad envelope, and overlays, such as heritage, vegetation, flood, bushfire, and significant landscape, can constrain or prohibit parts of a scheme. Council development controls then govern the detail: building height, setbacks, site coverage, car parking minimums, and, in Victoria specifically, a mandatory minimum garden area in the residential zones.

The terminology differs by state, which trips up newcomers. You apply for a planning permit in Victoria, a development application (often shortened to DA) in New South Wales and Queensland, and a development approval in Western Australia. Notification and appeal pathways differ too, with the Victorian Civil and Administrative Tribunal (VCAT) hearing planning matters in Victoria and the Land and Environment Court doing so in New South Wales.

To gauge approval risk, look at what is actually getting through council nearby, which is visible on the state planning portals and council development application trackers. Seeking pre-application advice from the council or a town planner before you commit is one of the highest-value, lowest-cost steps available. The town planning guide and the planning permit application guide cover the pathway in depth, and the development application approval guide covers the New South Wales and Queensland process specifically.

The cost side in more detail

For a first pass, the following indicative ranges are enough to build a defensible Total Development Cost (TDC). Treat them as screening figures and confirm with quotes once a site is serious.

• Construction. Detached housing roughly $1,800 to $3,900 per square metre, townhouses roughly $1,900 to $3,300 per square metre, and low-rise apartments roughly $3,500 to $4,500 per square metre, with Sydney and Melbourne sitting above the national average. Construction costs have been rising several per cent a year, so favour the upper end of a range for a project that will not start for a while.
• Demolition and site works. Demolition roughly $12,000 to $50,000, with site works highly variable depending on slope, rock, and soil.
• Consultant fees. Architect 5 to 15 per cent of construction, structural engineer 1 to 3 per cent, services engineer 1 to 2 per cent, Quantity Surveyor 0.5 to 2 per cent, with surveyors and building surveyors typically on fixed fees.
• Statutory fees and contributions. Development application fees plus developer contributions and infrastructure levies, which can be very large and vary enormously by location, in some growth areas reaching tens of thousands of dollars per dwelling.
• Service connections. New water, sewer, power, gas, and National Broadband Network (NBN) connections, budgeting thousands each, more where the mains are distant.
• Holding costs. Council rates, land tax, insurance, and site security over the life of the project.
• Contingency. Typically 5 to 15 per cent, highest at the concept stage and reducing as the design and pricing firm up. The looser your information, the more you should carry. A beer coaster feaso with no builder’s price should sit near the top of that range.

For townhouse projects specifically, the townhouse development guide covers the cost and design considerations that move the result most.

The revenue side in more detail

End sale values should come from recent comparable sold prices, ideally five to ten transactions from the past six to twelve months, adjusted for size and quality. Asking prices overstate the market and should not anchor your feaso.

You need an end value even if you intend to hold rather than sell, because it sets the asset’s worth, your development return, your equity position, and what a lender will advance against the finished stock. If you are holding, also estimate the rental or hold value, so you can test cash flow against finance and holding costs over time.

The lender’s view, in brief

It helps to know how the maths looks from the other side of the table, because it shapes what makes a deal financeable. A lender caps a facility against both the Total Development Cost (TDC) and the Gross Realisation Value (GRV), tests the margin on conservative inputs, and looks for your own equity in the land and early costs as evidence of commitment. Smaller projects, up to around three townhouses, may use retail rather than commercial finance. Modelling the funding stack, including debt and equity sizing and the resulting loan-to-value and loan-to-cost positions, is exactly the kind of work Feasly is built to handle once your rough feaso says a project is worth taking forward. The property development finance guide covers how lenders structure these facilities.

Common beginner mistakes a beer coaster feaso should catch

• Optimistic land price. Building the feaso around the asking price rather than a residual land value that the deal can actually bear. Work out what you can pay, then negotiate towards it.
• Optimistic yield. Assuming the maximum dwelling count the zone allows, before checking overlays, covenants, and what is getting approved nearby.
• Listing prices, not sold prices. Anchoring the end value on hopeful listings rather than verified transactions.
• Forgetting the time cost. Leaving holding and finance costs out, or underestimating the programme, which flatters every result.
• A thin contingency. Carrying 5 per cent on a project where you have no builder’s price. Early-stage uncertainty deserves a larger buffer.
• Sorting out structure and Goods and Services Tax (GST) after exchange. The most expensive mistake of all, because ownership structure and the margin scheme cannot be retrofitted once you own the land.

Where to go from here

A first-pass feaso is the start of a process, not the end. If your rough numbers clear roughly 15 to 20 per cent, the next move is Step 2: order the title, run a free Before You Dig Australia enquiry, get preliminary planning advice, and have a lawyer and accountant look at the contract and structure before you go unconditional. If the numbers are thin or negative, the beer coaster has done its job and saved you from a deal that did not stack up.

The first-pass sum itself is also exactly what Feasly was built to do quickly: enter the six inputs and it returns the development margin and the residual land value in minutes, so you can screen several sites at coaster speed, then deepen the same model into the full feasibility as a deal progresses, rather than rebuilding it from scratch. When you are ready to understand what that deeper model involves, the property development feasibility guide and the feasibility spreadsheet guide cover the next level of detail, and the property development hub maps out the whole journey from first site to final settlement.

A good beer coaster feaso will not make you money on its own. What it does is far more valuable for a beginner: it tells you, quickly and cheaply, which deals deserve your time and capital, and which ones to let walk past. Master that, and you have learned the single most useful habit in property development.