For those of you not familiar with Property Investment terminology, Gross Development Value (GDV) is a calculation of what an investment property project will be worth once all the development work has been completed. For property developers, GDV is an important metric because it is a pivotal component of the profit calculation.
An accurate assessment of Gross Development Value (GDV) is of vital importance for both, understanding the profitability of your development and raising the necessary finance in order to acquire and develop it.
So why is GDV so often a matter of interpretation? One that is subject to over ambitious inflation estimations and personal opinion?
Once you have calculated all of the costs in considerable detail for your development, it is very tempting to drop in a GDV figure that gives you the sort of profit you think your efforts deserve or your investors would want to see.
Always be conservative in your GDV predictions. Base your forecast on factual historic sale price data and don’t be tempted to over inflate the market in your forecasting.
Maximise the GDV of a Residential Property
There are of course additional factors that really do maximise the GDV potential:
Adding bedrooms to the footprint by extending upwards for example will certainly add value.
Similarly, a single story ground floor extension creating an additional reception room will have the same effect.
New bathrooms & kitchens
Off street parking will also add value to the property above and beyond normal growth rates.
If you have a good eye for the ‘value add’ you can maximise your GDV potential. Alternatively, consider working with an architect or interior designer who could help you realise the true maximum GDV for your project.
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This is blog post number 11.