The Feasibility Study During Due Diligence

You always want to give yourself enough time during the due diligence period in the contract that you can get the results of your feasibility study. You have checked everything yourself, but your feasibility study will give you a third party perspective. They can unemotionally evaluate whether or not this is an opportunity. If you have made a mistake anywhere in your numbers or your inspections, or your projections, they will find it. The feasibility study backs up everything that you have researched and provides the necessary documentation that lenders and prospective partners need.

While the cost of a feasibility study may make you want to skip this step, however, the cost of missing something could be significantly more. A feasibility study will allow you to make an unemotional decision about the project that may prevent you from investing in a project that isn’t going to be profitable.

The feasibility study is a fresh set of eyes for your project. It provides the pertinent facts that you and your investors need to know to determine if your project is worth your time and effort and capital. They will evaluate the current market to see what the rents will be for your property. This will allow you to determine whether or not your property will cash flow. They will check every aspect that we have discussed so far of your due diligence in addition to several we have not. They will validate everything that you have checked to make sure that you really do have a great project. If you don’t, they will tell you.

Another reason to get a feasibility study is because it will help you with your funding. When you are raising capital from your investors or getting a loan from the bank or even a combination of the two, they are going to want some kind of reassurance that you are on the right track. A feasibility study shows them that you have had third party consultants review and inspect the property to make sure that it is a good opportunity. They don’t care whether or not you do the deal, they only care about the validity of the study. As a result, your investors trust them.

A feasibility study is one of the most important reports you will get about your property during your due diligence period. Make sure that you have enough time that you can get the results so that you can make an educated decision before you move forward. As always, happy investing.