What exactly is the Gross Development Value or GDV?
To start, it’s a very important valuation metric that to a property developer or investor. As a highly beneficial tool to starting a project or building a financial appraisal, the GDV will show you if a profit has, or will, be made by the project and at what level.
This metric provides a key component in the appraisal process. An incorrect GDV can cause flaws in the projections which can cause financial harm to developers and investors.
The GDV should always be taken seriously. Its performance will impact all other aspects of the evaluation. It is the value that will show you how much your development property may be valued by the development community under the prevailing market conditions.
How do you determine the GDV? Initially, analyzing comparable properties in the area and evaluating the current property sales prices and recent transactions is required.
Your GDV value will come into play once the residual method of appraisal is determined. This equation then provides the valuation for which development property may then should be sold or purchased.
The residual method of appraisal formula looks like this:
Land = GDV – (Construction + Fees + Profit).
Now you can see how the GDV is the foundation to any development project as its value impacts all others.
The equation is simple, however, the market knowledge related to sales data, construction and development costs, proforma analysis, highest and best use and the entitlement process are not easy to come by. H.B. Springs Co. has the experience, background and ability to assess land for development in providing market evaluation. Contact our office for assistance.