Cahdco works with organizations that have a vision to create an affordable housing development to serve their clientele or address a need within their community. They come to us to determine if this vision is feasible. On one hand, they want to bring the project to life. On the other hand, they have to keep the organization’s financial wellbeing, internal capacity, and market conditions in mind.
In other words, they are trying to make the ‘go-no-go decision’ about the project. That means its time to conduct a feasibility study.
Taking anywhere from two months to two years, a feasibility study is used to determine if your project is viable, and under what conditions. To produce an accurate picture of your project’s feasibility, you have to consider and refine many project variables, which can be loosely placed into four categories:
Every iteration of the project you come up with during the feasibility phase will be translated into a pro forma – a forecasted budget for a real estate project that determines the amount of equity needed to build it, its net operating income, and the project cash flow. Overall, you want to make sure that you are adjusting the above variables so that your pro forma shows that you are:
- Achieving your project mission.
- Designing a financially viable project.
At this stage, risks can seem overwhelming as costs are high and many factors remain uncertain. However, many of these risks can be mitigated. For example, an organizations’ minimal development experience can be overcome by hiring a qualified project team with increased capacity. Or, a competitive funding application process can be made easier by organizing regular communication with the lenders. Even an uncertain economic environment can be overcome with conservative pro forma modeling. With the right project team capacity, the feasibility stage should be exciting rather than intimidating!
Your feasibility analysis doesn’t end here! Your project’s viability isn’t set in stone after you complete your initial feasibility study. Project feasibility has to be constantly monitored and (re)evaluated as the project progresses and as assumptions are verified or circumstances change. After you’ve completed a successful feasibility study and have made the ‘go decision,’ you can move onto the next stage of development…. Design & Development!
Want to learn more about making go-no-go decisions? Join us at the 2023 ONPHA Conference to play Go-No-Go: the affordable housing development game! find more details here.