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Real Estate Feasibility Studies

Real Estate Feasibility Studies: Key Steps for Profitable Projects

If you have a real estate business in Dubai or anywhere else, conducting real estate feasibility studies is a good idea. The reason is that they tell you whether your project is worth the time, money, and effort.

Not only that, but real estate feasibility analysis is also conducted to conduct a comprehensive analysis of the project to determine its profitability, demand, and associated risks.

5 Key Components of Real Estate Study

Now that we know why a feasibility study is important, let’s take a look at the five main components of the feasibility study

  • Capital

In this part, you discuss the money needed for the project. You look at where the funds will come from, how you will manage the money, and whether you will use your savings or take out a loan.

  • Land

In this component, a few important things about the selected land for the project are checked. This includes whether the location is suitable for this building or not, such as being close to markets, housing areas, and transport links.

The shape and size are also considered, as they play a major role in the effectiveness of the project. If the land is not in the right shape, it might be challenging to build on it.

  • Zoning

Zoning laws are rules related to land use that must be followed strictly. These laws describe what is allowed in the land and what is not. For example, if you build a shop at a location that can only be used for housing purposes, you can get a penalty from the authorities.  

It is recommended to ensure that the project follows the rules. If it does, then that is good. If it doesn’t, you need permission from the relevant authorities. Sometimes, authorities don’t agree with your plan and may ask you to change the location.

  • Construction

It is the most important part of the study as it decides how to actually build a building and how much it will cost. It also ensures that you know the material of the building, the number of workers, and the time required to complete the project.

  • Design

This part covers the size, layout, and style of the building. This includes

  • Number of floors
  • Building size
  • Inside of the building
  • Number of rooms and offices and how to locate them
  • Outer look of the building
  • Material needed for the exterior of the building

The design of the building should be according to the space and the client’s requirements. If an investor requires an old design of the building, it should reflect that. Overall, the design should be simple, beautiful, and practical.

How to Conduct a Feasibility Study?

We need a feasibility workflow sheet to fully understand the feasibility of the five components. It includes

  1. Site planning
  2. Concept iterations
  3. Deal evaluation

Site Planning

Site planning analyzes the land where the development will take place. The location is fixed, permanent, immobile, and always stays in one place, which is why it is called real estate.

Things to consider

  • Site Selection

A survey of the site is done to determine who owns it and what its boundaries are. Visiting the site helps us understand the exact size, shape, and boundaries of the land.

  • Environmental Concerns

You may wonder why we should consider environmental concerns for the project. Environmental concerns are important when deciding on the land for the project, as too steep and uneven land makes construction difficult.

  • Code and Regulation

Every country and city have rules, and every piece of land has rules known as zoning rules. Studying the zoning laws can help you decide on the ideal land for your project. It is recommended to go through the zoning laws before selecting the land, as some areas are specific for the market and some for residence.

Concept Iterations

As we know, a building can be designed in many ways, and to determine the correct design, different ideas are tried. This process of trying is called concept iteration.

At testFit, you can quickly try different ideas to select the most suitable design for your project. They provide services for experimenting and adjusting until you find the best design.

Deal Evaluation

Deal evaluation is the third step of the feasibility studies that evaluate the project based on money. By keeping a basic starting point in mind, we decide whether the project is profitable or not. Usually, two key groups are involved in this study

  • Limited Partners (LPs) Limited partners are companies and investors who provide the money for the project
  • General Partners (GPs) GPs are engineers and developers who manage the project.

Everyone wants to profit from the project and usually aims for a 6.5% return on their costs. The technical term for this is Yield on Cost (YoC). YoC shows how much profit you made in one year by comparing the income to the total amount spent on the project.

What to do after Feasibility Study?

After the real estate feasibility study sample, decide whether you should work on it or not. If it is worth pursuing, then move to the next steps, which are

  • Develop a Business Plan

A Business Plan is considered a roadmap to success because it outlines everything about the project, from the required budget and monthly costs to possible risks. It helps keep you focused and shows others how prepared and efficient you are.

Also, insight into BEP (Break Even Point) can give an idea of when your business will start making a profit.

  • Secure Finance

The next step is to secure funding to make your business plan work. There are three main ways to get money

  • Get a loan from a bank
  • Use your savings
  • Seek funding from investors

Having enough money is crucial because completing the project would be impossible without it.

4 Benefits of Real Estate Feasibility Studies

There are several benefits of conducting a real estate feasibility analysis.

  • Better Decision Making

Feasibility studies result in real data for your project, which helps you make better decisions based on facts instead of guesses.

  • Increased Success Rate

After conducting feasibility studies, the success rate increases because you gain insights into the market and people’s demands, allowing you to plan accordingly. It also saves you time and money from investing in projects that are unlikely to succeed.

  • Earn More Investment Dollars

If the results of a proper feasibility study attract people and get them interested in your project, you can easily earn more dollars from investors. Investors want to see proof that the project is going to be successful, and a good feasibility study will help make them willing to pay more for the project.

  • Greater Return

The feasibility study real estate template does not only reveal whether this specific land is suitable for your project or not, but it also gives you thoughts and ideas of other areas that could be more beneficial and profitable for the project.

Cost of Feasibility Studies

A basic real estate feasibility study costs 1500 dollars. It provides a general report on the selected land that reveals market and demographic information.

However, a customized study has a high rate, around 1500 to 25000 dollars. The price increases with the number of components you add to it, like market analysis, competition analysis, etc. In short, a more detailed study will cost more money.

Conclusion

At the end of this article, we hope it has provided you with a comprehensive understanding of real estate feasibility studies and their importance in project success. Conducting feasibility studies helps you make informed decisions, reduces the risks of failure, increases the profit amount, and attracts investors. A good feasibility study reveals potential risks and financial requirements that can help guide the project toward success.

If you have a Real Estate Business and don’t know much about real estate feasibility studies, don’t worry—reach out to Al Riyady for guidance and for setting up your business in the UAE.

FAQs

A feasibility analysis is a comprehensive analysis of the project to determine its profitability, demand, and risks.

The duration of the feasibility study depends on the complexity and size of the project. It usually takes a few weeks, but customized and detailed studies take much longer.

No, conducting a feasibility study is optional. However, experts recommend it as it helps identify risks, improve the chance of success, and provide many other valuable insights.


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