There are two sides to a feasibility study and in an earlier article I discussed cost side of format and:
Now Let's Discuss The Income Side
Without Sales Income, All You’ve Done Is Spend Money, And Anyone Can Do That.
So that we are clear in what I am going to define for you, let me say that there are two forms of Income.
We shall be dealing with Sales Income, in this article, which in our case will consist of large amounts of money being received as a developer in exchange for property units we have created.
The other form of income in a feasibility study, is Rental Income and will be addressed at another time when I write an E-book on Commercial Development.
Because of make up of our feasibility study sheet, there will be no deductions from out Gross Sales Income, because we have allowed for those costs on Cost Side of our feasibility study.
Items such as sales commissions for sales agents and various marketing costs have already been allowed for previously.
Now I have seen some formats of feasibility study, which deducts marketing costs from Gross Sales Income to produce a Net Sales Income.
It achieves nothing – "all costs are costs" and they should be put on cost side of feasibility study, which is what I do and have always done.
When Can You Get Your Hands On The Sales Income.
Getting sales income into your account is very important, yet many people never ask question as to what procedure is “exactly” in their neck of woods.
Get to your Conveyance Expert and have them give you a schedule of events “with an estimate of time for each stage.”
This information is important in preparing your cash flow feasibility study format, as it results in reducing your interest cost.
So by knowing this information at beginning of a development investigation, you are adding a little bit of “certainty” to early stages of your feasibility study.
Let me give you an example:
At end of construction phase builder moves off site, there are a whole range of things that have to occur, any or all of which can delay, settlement taking place and so delay you getting Sales Income.
Some of these things are:
•Architect’s inspection of entire project.
•Architect preparing a Defects List.
•Builder calling back subcontractors to correct defects.
•Architect’s final inspection.
•Architect issues Completion Certificate
•Surveyor (engineers in some countries) does final measurement of individual residential accommodation units and compares to Unit Plan that is included in Sales Contract.
•Preparation of Final Unit Plan (as used by conveyance office) for settlement.
•Lodgment of Unit Plan with Titles Office.
•Registered Title Issued by Titles Office.