How Important Is The Gross Development Value?
Whether a property developer is seeking development finance or not, one of the most important financial considerations is to establish an estimate of the Gross Development Value (GDV) of the development project. It doesn’t matter if you are building one property or several on the site – you will still wish to know this valuation.
What is the Gross Development Value?
In very simple terms, it is an estimate of the value of the property development once the works are fully completed both to the site and the properties that are ready for sale.
This valuation will help you decide whether the proposed project is viable from a financial perspective. After all, if having deducted from the Gross Development Value the estimated costs of buying and developing the land, erecting the buildings etc, you end up making a loss, you would surely not wish to proceed with the project.
How is the Gross Development Value worked out?
A professional valuer will need to look at what similar properties are selling for in the vicinity and use those values to help work out the GDV.
That is fine if you are just building the properties to sell but it is rather more involved if you intend to rent out the properties to tenants. In which case, an assessment will need to be made of how much similar properties are being let out for in the locality by checking rental prices with letting agents in the area.
So, as you can see, it is extremely important that you obtain the GDV as part of your due diligence when contemplating investing what is likely to be many hundreds of thousands if not millions of pounds. In any event, if you are going to be seeking development finance, the potential lender will no doubt require this information.
We hope that the above has been of some benefit.