Development profit calculator

Profit on cost, profit on GDV and return on equity: three different questions

The calculator starts with the only unarguable number: profit, which is gross development value (GDV), the aggregate end value of the completed units, less total project cost. Cost must be all-in: land, build, contingency, professional fees and every pound of finance, or the margin is fiction. From that one profit figure it derives three ratios that answer three different questions. Profit on cost, profit divided by total cost, asks how much cushion the scheme has against things going wrong. Profit on GDV, profit divided by end value, asks how far sales prices can fall before the margin is gone; it is the margin valuers sense-check. Return on equity (ROE), profit divided by your own cash in the deal, asks what the scheme does for you personally, which is a different thing from what the scheme does in aggregate.

On the defaults, £2,400,000 of GDV against £2,000,000 of total cost gives £400,000 of profit: 20 per cent on cost, 16.7 per cent on GDV, and a 100 per cent return on £400,000 of your cash over 24 months. Three healthy-looking numbers, one scheme, and funders will quote all three back to you at different stages of the process.

Why lenders test 17.5 per cent and JV partners test 20

Profit on cost is the first number a credit committee reads because it measures the buffer between plan and loss. As of June 2026 senior lenders generally want at least 17.5 per cent on cost and most decline below it: at 65 per cent loan to cost a lender survives a substantial fall in GDV, but a thin margin means the first cost overrun starts consuming the equity that protects them. Equity partners test harder, at 20 per cent plus, for a mechanical reason: they stand last in the repayment queue, behind every lender in the capital stack, so the margin is not just where their return comes from, it is the only thing standing between their capital and a loss. A scheme at 15 per cent on cost is not a negotiation, it is a decline, which is why the honest first step on any appraisal is pressure-testing the GDV; our guide to what GDV means in property covers how valuers actually assess it.

Reading the annualised return, with the caveat that matters

The annualised figure is a simple annualisation of your ROE: the return divided by the term in years, no compounding, no cashflow timing. It exists so you can compare a 12-month scheme against a 30-month one on level terms, because 40 per cent earned in a year beats 60 per cent earned over two and a half. It is not an internal rate of return (IRR): a real IRR models when each pound goes in and comes out, and since development equity is usually drawn over the build rather than on day one, the true IRR on a scheme is normally higher than this simple figure. Use it for ranking, not for reporting.

The most useful experiment on this page is to hold the scheme still and vary your cash in. The same £400,000 profit on £400,000 of equity is 100 per cent ROE; restructure so a funding stack or a JV partner carries most of the equity and your ROE on the cash that remains multiplies, at the price of the funding cost and a share of the profit. Whether that trade pays is exactly what the other calculators on this site exist to test. Outputs are illustrative, based only on the figures you enter, and are not a valuation, a quote or advice.

Frequently asked questions