How Alpus Evaluates Any Property Development Site
In the following post and associated video Alan explains how Alpus goes about evaluating a site for property development site, ascertaining the likely Gross Property Development Site Value of the site after transformation from its current low value state into high value for a new purpose. Alpus also assesses all the likely costs of property development site and deduct these from the GDV less profit margin required in order to give the estimated site value (what you can afford to pay for the site).
- 1. The Site Location, Specific Address And Post Code.
In order to evaluate any site within England and Wales, Alpus uses a number of different software tools among which are Nimbus Maps, and Property Data.
Both of these software tools need the specific location of the site, its postal address including postcode.
Sometimes a site may be part of a current demise, and so the exact boundary or boundaries needs to be ascertained and the area of the site needs to be calculated.
- 2. Use Nimbus Maps To Enter The Specific Address And Post Code And Identify The Title Holder (Owner).
If required a copy of the title deeds can be obtained from HM Land Registry.
Nimbus maps will show the site area and the built areas on the site, the number of such buildings and the area of each floor level and the height of each building.
Using the layers on Nimbus Maps you can also see whether the buildings on the site are listed, or if it is in a conservation area.
You can also check if the site is within the flood zone of a river or the sea.
You can also check the Planning Policy in the current area, to see what the Local Planning Authority envisages for that area.
You can also see what are the current planning applications on the site and their status, whether approved, or rejected, or under consideration or under appeal, if an application has been rejected.
Additionally from Nimbus Maps you can also see what the current average residential value in the particular area you are researching.
- 3. Having Obtained Basic Information from Nimbus Maps, Alpus use Property Development Site Data To Calculate The Possible Gross Development Value of the Site
By inputting the address and postcode completely, and using the information gleaned from Nimbus Maps, we can input the gross area before development and that after property development site, thus we calculate the new additional construction area if it is refurbishment and extension. Alternatively we can calculate for a complete demolition and new build on the site.
We may well carry out a few different calculations for different development options. We can then compare the likely costs and returns associated with each option. Thus we can conclude a preferred option to move forward with.
- 4. We Then Use Some Other Property Development Site Construction Estimating software To Double Check the Property Data figures.
We ensure that the figures are comparable for the base assumptions, and re-calculate the design and construction costs for the property development site.
- 5. We Carry Out A Preliminary Risk Assessment On The Project.
Our preliminary risk assessment will identify the top 5 – 10 risks on the project and allocate a percentage for contingency for the budget. At this stage contingency of a minimum of 10% must be allowed, and it could be a greater amount, since designs are not yet available and we are at feasibility stage for the project.
- 6. We Check Finance And Funding Costs.
We allow a provisional amount of 10% for funding the project, since that accords with our recent experience. In certain circumstances the actual amount may be higher or lower, if we have a specific funder in mind who has indicated in principle their agreement to provide funding at a certain rate. We will re-run all feasibility calculations using 10% or the assessed rate, and adjust the property development site data calculations accordingly, since they calculate based on 4% which in our experience is insufficient.
- 7. An Example Of A Gross Property Development Site Value Feasibility Calculation, Which Thus Calculates The Site Value From Gross Development Value Less All Development Costs.
| Notes | |||||||
| Purchase price | 750,000 | What you can afford to offer for the site | |||||
| Stamp duty | 50,000 | Including additional rate stamp duty | |||||
| Legals | 5,000 | Legals for sales must come out of profit | |||||
| Architects | 108,000 | 11% of refurb / construction costs for architects fees & project management | |||||
| Refurbishment | 986,000 | 9,500 sq feet @ å£87/sqft + VAT for average standard* | |||||
| Subtotal | 1,899,000 | ||||||
| Contingency | 189,900 | 10% of subtotal for contingency (minimum – could be more) | |||||
| Finance costs | 189,900 | 10% of subtotal for finance costs | |||||
| Total costs | 2,278,800 | ||||||
| Value å£/sqft | 325 | This is the local average asking price (Nimbus Maps and Rightmove, On the Market, Zoopla) | |||||
| Total value | 3,087,500 | Gross Development Value | |||||
| Profit | 808,700 | ||||||
| Profit % | 35.40% | We would not use less than 33% at this stage, since all calculations of costs are approximate | |||||
* Construction costs are especially volatile currently and that is why we double check these estimates using property development site estimating software.
You may be interested in the following video from Brickflow wherein Ian Humprises interviews Frankie Longhurst Director Of Vaulations At Colliers International:
Great article; thank you for sharing “How Alpus Evaluates Any Property Development Site”. It explains how the whole process works very well, and it is exciting to find out exactly how the evaluation process works. Profit breakdown is beneficial, and it shows all studies of potential costs. Excellent post; thank you for that. Have a great day. Regards. Vlad
Hi Vlad, Thanks very much for your comment, have a great weekend! Best Alan