How to appraise a property development

If you are looking at a property development or a refurbishment job, then a lot of due-diligence will be involved. Ultimately you will need to sell the property for more than you bought and developed it for minus every single cost. And also, the time it has taken, as time is a worth a lot to.

Step 1

Work out the Gross development value. This will be the total value of the product once all work has been completed. This may include getting a professional valuation so you have a solid second opinion. The most accurate way of doing this will be to go onto Rightmove and searching SOLD properties only.

Look at the closest comparison in terms of size, location, bedrooms and look at the properties of a high standard as this is the level of quality you will be competing with. Tip use this valuation as a negotiating tool when putting down an offer.

Step 2

Take off 30% for your development profit margin. This is how much we ideally will want to make off the project, so we will need to ensure this is in the resale value when it comes to selling the property.

Step 3

Take off other costs, make sure you get accurate quotes and/or estimates for all the below… Legal costs    – could be £2,000 -£4,000 Mortgage broker fees – some brokers charge fees other don’t Lending fees – There could be lending fees if you go for a mortgage or bridging loan Stamp duty – Calculate your standard stamp duty Angel investor borrowing – If you are borrowing money from an investor take this off to.

Refurbishment costs – this will likely be your largest cost, make sure you get several builder quotes, or if you are the builder then ensure you calculate everything down to the penny.   With all these costs added together as a company we would moved forward based our results which will be in the form of ROI (return on investment). We have our own spreadsheet which does this all for us. We have been updating and evolving our spreadsheet calculations for a number of years to become more accurate and reliable. We are offering this as a free tool for anyone to use… Just feel in the box below for an instant download