Feasibility tool
Residential development feasibility
Step 1 works back from end value to what the land is worth. Step 2 takes those numbers and lets you shape the funding.
Inputs
Indicative only — a guide, not a formal feasibility, valuation or finance offer. Every deal is assessed on its merits. Send us your numbers for a considered view.
Understanding residential development feasibility
A residential development feasibility calculator works back from what the finished project will sell for to what you can afford to pay for the land — the residual land value — and then shows how the capital stack behaves once you fund it.
The headline figure is the residual land value (RLV): gross realisation (GRV) less selling costs, construction, fees, contingency, finance and your target profit, adjusted for acquisition costs. Pay more than the RLV and your margin erodes; pay less and it grows.
The metrics, explained
Total development cost (TDC) is everything it costs to deliver the project — land, construction, professional fees, contingency, finance interest and brokerage. Loan to value (LVR) is total debt divided by the end value; loan to cost (LTC) is total debt divided by TDC. Lenders size senior debt to the lower of an LVR and an LTC limit, so both matter. Return on equity (RoE) is development profit divided by the equity you contribute; margin on cost (RoC) is profit divided by TDC — lenders usually want to see a margin comfortably into double digits. The blended cost of funds is the weighted-average interest rate across your debt layers — the true cost of the capital stack once mezzanine or preferred equity is added. The equity multiple is how many times your cash equity comes back.
More leverage lifts return on equity but raises LVR, LTC and the blended cost of funds — the art is fitting the layers so the numbers still clear the lender’s limits and leave your margin intact. Move to Step 2 and slide the senior and mezzanine layers to see it happen live, then send us the deal for a considered view.
Frequently asked questions
What is a good development margin on cost?
As a rule of thumb many lenders like to see a margin on cost (profit ÷ total development cost) of around 18–20%+ for residential, though it varies with risk, presales and market. Use the calculator to test how sensitive your margin is to build cost and end value.
What is residual land value?
Residual land value is the maximum you can pay for the land and still hit your target profit, after allowing for construction, fees, contingency, finance and selling costs. It is the single most useful number when assessing a site.
How much equity do I need for a residential development?
It depends on leverage. At around 65–72% loan to cost you would typically fund the balance with equity (and sometimes a mezzanine layer). Slide the stack in Step 2 to see the equity requirement change.
Is this a formal feasibility?
No — it is an indicative guide to help you frame a deal, not a formal feasibility, valuation or finance offer. Send us your numbers for a considered view.