Step 3 — Crunch the Numbers (without frying your brain)

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Okay — you’ve found a site, you’ve spoken to the owner. Now: what’s it actually worth?

This is where a lot of beginners freeze. Too many spreadsheets, not enough clarity. But here’s the truth: you don’t need to be a financial wizard to get started. You just need a basic framework, a few rules of thumb, and a willingness to double-check with people smarter than you (builders, architects, agents).

Let’s break it down: simple, practical, no jargon overload.

The 3 things that drive land value

Every site boils down to three numbers:

  1. What can you build? (number, type, and size of units)

  2. What’s it worth when sold? (your GDV = Gross Development Value)

  3. What will it cost to build? (all-in development costs, not just bricks and mortar)

From that you work backwards to what the site is worth. Easy formula:

👉 Land Value = GDV – Costs – Profit

Step 1: What can you build? (educated guesswork)

This is part art, part science. Early on, you’re not drawing masterplans — you just need to make reasonable assumptions.

  • Look at similar sites nearby on Google Earth + Rightmove.

  • Use the “ruler” tool in Google Earth to measure plots and layouts.

  • Copy what’s already working locally.

  • Be conservative: don’t max it out. Leave wiggle room.

  • Build a relationship with an architect who can advise.

⚠️ Rookie mistake: assuming you can squeeze 10 units where planners will only allow 5. Better to underestimate now and be pleasantly surprised later.

Step 2: Gross Development Value (GDV)

Once you’ve got a feel for what you can build, figure out what it’ll sell for.

  • Check sold prices (not asking prices) on Rightmove + Land Registry.

  • Build a mini database: unit type, size (sq ft), condition, price.

  • Work out £/sq ft averages for your area.

Then multiply:
👉 No. of units × unit size × £/sq ft = GDV

Example:
4 houses × 1,200 sq ft × £375/sq ft = £1.800m GDV

Step 3: Development costs (the black hole)

This is where most newbies get lost. Builders love to say “£175 per sq ft” — but that’s just the build cost. You’ve also got:

  • Professional fees (architects, engineers, agents)

  • External works (roads, gardens, parking)

  • Extra infrastructure (drainage, utilities, etc.)

  • Selling fees, finance costs

👉 Rule of thumb:

  • South East: £200/sq ft all-in

  • London: £250/sq ft all-in

  • Outside SE: £185/sq ft all-in

Example:
4 houses × 1,200 sq ft × £200/sq ft = £960k total cost

Step 4: Profit margin (your safety net)

Developers typically work off 20% of GDV.
Banks like it. Builders use it. It’s the industry standard.

Example:
20% of £1.800m = £360k profit

Step 5: Residual land value

Now crunch the formula:

GDV (£1.800m) – Costs (£960k) – Profit (£360k) = £480k land value

That’s what the site is “worth” with planning in place.

But you’re not paying that. You’re sourcing it without planning, so you want a discount (75–85% of that number).
👉 Target price: £360k–£408k

That margin is what protects you when (not if) something unexpected pops up.

Shortcuts if you’re new

  • Partner with a developer: you find deals, they sanity-check numbers, you split profits or take a finder’s fee.

  • Lean on builders + architects: ask for rough reviews, buy them lunch, promise future work.

  • Build a comps database: track what land and houses actually sell for in your patch.

Quick checklist (so you don’t overthink it)

  • What can I reasonably build?

  • What’s the GDV (realistic £/sq ft)?

  • What’s the all-in cost (£/sq ft)?

  • Did I leave a 20% margin?

  • Am I buying at 75–85% of land value?

If yes → it stacks. If no → pass.

⚡The big takeaway: Don’t try to be perfect. You’ll refine as you go. Early on, just focus on big enough margins to cover your learning curve.