Common residential development feasibility mistakes

Short answer. The ten most common residential feasibility mistakes cluster around inputs that age, scenarios that drift apart, cashflows that get aggregated, and outputs read in isolation. Each one is fixable. None of them are careless.

The ten mistakes, in order of frequency

1. Pricing pulled from old comparables. The single most common mistake. Three to six months is the half-life of useful pricing data in a moving market.
2. Construction rate from a different cycle. A two-year-old rate from a previous project, used unadjusted. Build costs in Australia have moved fifteen to thirty percent inside two-year windows in recent cycles.
3. Contingency too thin. Three percent. Five if you are feeling generous. The correct number for a residential apartment scheme is closer to seven and a half, especially in the first two years of a new sub-market.
4. Annual cashflow only. Peak debt and IRR both fail under annual rollup. The lender sizes against the monthly peak.
5. DM fee handled inconsistently. Treated as a cost in TDC sometimes, as a distribution other times. Decide once, document it.
6. GRV gross of selling costs and GST. Net realisation is what funds the project. Headline GRV overstates it.
7. Sensitivities run only on revenue. Revenue gets all the attention. Construction rate, interest rate and timing each move the answer just as much.
8. Scenarios that diverge silently. Base and downside live in different files, then someone updates the construction rate in one but not the other.
9. Outputs read in isolation.Profit on cost can clear the hurdle while development margin does not. IRR can be high while peak equity exceeds the developer’s appetite. Read all six core metrics together.
10. “Final” version is not final. The model that goes to IC is not the one that gets used post-approval. Version chaos creates phantom assumptions.

The structural causes

Most of these mistakes share a common root. They are seams in the workflow where information has to move from one document, one analyst or one stage to the next. Spreadsheets are particularly bad at preserving information across seams.

How to catch each mistake before IC

Pricing and construction rate

Date-stamp every input. Refuse any unit price older than three months and any construction rate not signed off by a current QS for the relevant typology. Make the date a visible field, not buried metadata.

Contingency

Write down your contingency policy. Five percent for a tested typology in a known sub-market. Seven and a half for new typologies or new geographies. Ten in a speculative market or where supplier risk is elevated. Document the choice.

Cashflow and outputs

Run the cashflow monthly, every time. Calculate all six core metrics (GRV, TDC, profit on cost, development margin, IRR, peak debt and peak equity). Read them together, never in isolation.

Scenarios

Keep scenarios inside the same project. Changing one input updates all scenarios. Compare them side by side before circulating.

Practical takeaways

• Date-stamp every input. Treat anything older than three months as a guess.
• Run the cashflow monthly, never annually.
• Read all six core metrics together, never one at a time.
• Keep scenarios inside a single project, not separate files.
• Write down your contingency policy before the pressure to cut it arrives.