How to Calculate Property Development Profit in the UK

Why profit calculations matter in property development

Before you exchange on a development deal, you need to know — with reasonable certainty — whether the numbers work. The difference between a strong deal and a loss-maker often comes down to whether you've correctly accounted for all your costs. Many developers, particularly those starting out, underestimate acquisition costs (especially SDLT), finance costs, and selling costs. This guide walks through every component of a development profit calculation.

The key profit metrics

There are four main ways to express the profitability of a development deal, and experienced developers use all four:

1. Gross Profit (£)

This is simply GDV minus total costs. If your Gross Development Value (the total expected sale proceeds) is £450,000 and your total costs are £370,000, your gross profit is £80,000. Simple, but it doesn't tell you how hard your money is working.

2. Margin on GDV (%)

This is gross profit divided by GDV, expressed as a percentage. A £80,000 profit on a £450,000 GDV is 17.8% margin on GDV. This is the most commonly used metric in UK development because it's comparable across deals of different sizes. Most experienced developers target a minimum of 20% to allow for contingencies and risk.

3. Return on Investment / ROI (%)

ROI is gross profit divided by total costs. An £80,000 profit on £370,000 of total costs is 21.6% ROI. This tells you how efficiently your total cost base is generating returns.

4. Profit on Cost (%)

Slightly different from ROI — profit on cost is typically gross profit divided by total project cost (excluding finance). It's often used by lenders and appraisers to assess the intrinsic deal quality before financing is applied.

What goes into total development costs?

To calculate profit accurately, you need to account for every cost. Missing any of these is one of the most common ways deals go wrong:

Acquisition costs

• Purchase price — the agreed price for the property or land
• SDLT (Stamp Duty Land Tax) — on a £280,000 purchase as an additional dwelling, you'll pay £22,000 in SDLT at 2025/26 rates (including the 5% surcharge). Get this wrong and your profit projections are immediately out.
• Legal fees — typically £2,500–£5,000 for a residential purchase, more for complex transactions
• Broker fee — if you're using a finance broker, typically 1–2% of the facility size
• Survey costs — structural, building, and any specialist surveys

Build costs

• Construction costs — based on floor area (m²) and build type. Light refurb: £500–£1,000/m². Heavy refurb: £1,000–£1,800/m². Conversion: £1,200–£2,100/m². New build: £1,500–£2,800/m².
• Contingency — never skip this. 10% is typical for experienced developers, 15% for first-timers or complex sites.
• Professional fees — architect, structural engineer, QS, planning consultant. Budget 8–12% of build cost.
• Building control — required for most works
• Site-specific costs — utilities connections, ground investigation, party wall awards

Finance costs

• Monthly interest — development finance typically costs 0.7–1.1% per month on the drawn balance. On a 12-month project at 0.85%/mo with 60% average draw, the interest alone on a £300,000 facility is around £18,360.
• Arrangement fee — typically 1.5–2.5% of the facility size, paid at drawdown
• Exit fee — typically 1–2% of the facility, paid on repayment

Selling costs

• Estate agent fees — 1–2% of sale price
• Legal fees — for the sale, typically £1,500–£3,000
• Marketing — professional photography, floor plans, rightmove/zoopla listing costs

A worked example

Let's work through a real example. You're buying a Victorian terrace for £280,000 to convert into two self-contained flats. Expected GDV is £520,000 (£260,000 per flat).

Cost Category	Amount
Purchase price	£280,000
SDLT (additional dwelling)	£22,400
Legal fees (purchase)	£3,500
Survey	£1,500
Total Acquisition	£307,400
Build cost (180m² × £1,600)	£288,000
Contingency (10%)	£28,800
Professional fees (8%)	£23,040
Total Build	£339,840
Development finance (12mo, 70% LTV, 0.85%/mo)	£28,500
Arrangement fee (2%)	£9,100
Exit fee (1%)	£4,550
Total Finance	£42,150
Estate agent fees (1.5%)	£7,800
Legal fees (sale)	£3,000
Total Selling	£10,800
Total Costs	£700,190
GDV	£520,000
Gross Profit	–£180,190

Wait — that's a loss! The deal doesn't work at these numbers. The GDV needs to be significantly higher, or the purchase price lower, for this to stack. This is exactly why running accurate appraisals before you buy is so critical.

Using a calculator to speed up appraisals

Running these calculations manually in a spreadsheet is slow and error-prone. A dedicated property development calculator like Marginly handles all the calculations automatically, including the SDLT computation (which has changed multiple times in recent years) and development finance costs. You can model multiple scenarios quickly — changing the purchase price, GDV, or build cost assumptions to find where the deal needs to be for it to work.