Real Estate Project

Feasibility Study
 Financial
Feasibility Study
Real Estate Project Feasibility Study
- Financial Feasibility Study

– This section assesses the economical viability of your proposed project.

– A full description of all possible costs reflected on the Market

and Technical Feasibility Studies.

– Factors in the projected revenue streams from sales and marketing plan.
Show details on how to monetize those plans.

– If the projected sales is not enough, this study shall provide for the
schedule of the other financial sources.

– Determines a Go or a No Go project.
Real Estate Project Feasibility Study
- Financial Feasibility Study

Essential Parts

1. Determination of the startup costs.

2. Creation of cash flow projections.

3. Assessment of the return on invested capital

Real Estate Project Feasibility Study
- Financial Feasibility Study
Essential Parts - to determine Capital Cost and Operational Cost

1. Determination of the startup costs.

Resources required to start and operate the project:

 Assets
 Human
 Money
 Intangible assets
These Resource requirements will be estimated in terms of money to check
your proposed project’s Capital cost, Operating cost, and viability.
Real Estate Project Feasibility Study
- Financial Feasibility Study
Essential Parts - to determine Capital Cost and Operational Cost

1. Determination of the startup costs.

Production/Construction Cost – the cost incurred to actually produce the

products or services.
 Production Overhead Cost – all other cost in producing the products or
services.
 Direct Materials and Labor - costs that go directly into producing the
products or services

These Production or Construction requirements will be estimated in terms of

money to check your proposed project’s Capital cost, Operating cost, and
viability.
Real Estate Project Feasibility Study
- Financial Feasibility Study
Essential Parts

2. Making cash flow projections - Cash flow is the net amount of

cash being transferred into and out of a company.
Includes the amount of funds needed for startup.
Needed capital - The equity capital and borrowed funds if necessary.

These projections include:

 production costs
 other resources cost
 projected sales and
 projected operating expenses

If cash flows is negative during the early years, show how and when
these cash flow deficits will be financed through additional funding
Real Estate Project Feasibility Study
- Financial Feasibility Study
Example of Cash Flow

Sales/Revenues
Operation Expenses

Net Cash Flow from Operations

If you need financing, borrowings

& repayments must be indicated.
Real Estate Project Feasibility Study
- Financial Feasibility Study
Essential Parts

3. Assessing the return on invested capital.

Common methods:
a) Net present value – If the NPV of the discounted cash flows exceeds
the cost of the initial investment, then the project is feasible and should
be accepted.
b) Internal rate of return – IRR can be used to compare the attractiveness
of several projects. The higher the value of an IRR, the better the
investment is.
c) Payback period – The payback period is the number of years that it
takes for the return from a project to recover the costs of the
investment. Shorter payback periods are preferred.
Real Estate Project Feasibility Study
- Financial Feasibility Study

Final Note

 The study must show the assumptions of the financial projection and
figures for minimum 10 years term.

What is the evidence of viability?

❑ Financial viability tests will be carried out including, calculating the net
present value NPV, internal rate of return IRR, payback period, financial ratio
analysis and others. The reliability and consistency of viability will be the basis
for judging and acceptance.
 THANK YOU

Ma Cristina D Ventucillo, REB, REA

crisventucillo@gmail.com