Commercial-to-residential deals look good on paper. “Bought cheap, converted fast, instant uplift, thank you very much.” And then reality shows up with a hi-vis vest, a spreadsheet and a surprise invoice.

If you’re serious about building wealth through property, you need a clean, repeatable commercial to residential deal analysis process. One that tells you, quickly, whether the deal stacks up and what would need to be true for it to work.

Start with the big three: GDV, ROI, and build costs

GDV (Gross Development Value) is what the finished scheme is worth at the end, either:

• the total sales value (if you’re selling units), or
• the value of the asset based on rental income/yield (if you’re holding).

ROI is your return relative to money in. Investors often track:

• Profit on cost (profit ÷ total project costs)
• Cash-on-cash return (annual net cashflow ÷ cash invested)
• IRR (if you’re advanced)

Build costs are where optimistic deals go to die. Your first draft budget should include:

• construction + materials
• professional fees (architect, engineer, planning consultant, building control)
• surveys (structural, asbestos, drainage, ecology if relevant)
• utilities connections, fire upgrades, acoustic works
• finance costs (arrangement fees, interest, exit fees)
• contingency (at least 10%)

Then add the “quiet killers”: planning conditions, party wall, access constraints, compliance upgrades and timelines.

Rental exit vs sale exit: the numbers change completely

Before you fall in love with the uplift, choose your exit because it dictates what you should measure.

If you’re selling (build-to-sell):

• GDV is driven by comparable sold prices
• margins need to withstand market shifts and delays
• you’ll care about marketing costs, legals and sales periods

If you’re holding (build-to-rent / refinance):

• the end value is driven by net rental income and yield
• your focus is long-term cashflow, mortgageability and operational costs
• structure matters more: personal vs limited company property investor route, profit extraction and how this fits your wider property tax UK plan

A deal can look “great” on a flip and be terrible as a hold or vice versa. Your job is to pick the lane early, then model the right outcome.

Key red flags when crunching the numbers

If any of these show up, pause and re-check:

• GDV based on “hope comps” (nice street, nicer finish, different buyer profile)
• Build costs based on last year’s prices or a “rough estimate”
• No allowance for compliance (fire safety, soundproofing, insulation, ventilation)
• Ignoring abnormal costs (steelwork, damp, drainage, roof, access scaffolding)
• Finance costs missing or calculated as if time doesn’t exist
• No contingency
• Exit assumes instant sale or perfect letting with zero voids

If you spot three or more, it’s not a deal, it’s a creative writing project.

How to stress-test a deal

A proper commercial to residential deal analysis doesn’t stop at “base case”. You need a stress test to see if the deal survives real life.

Try these simple scenarios:

• Build costs +10%
• Timeline +3 months (more finance cost + more overhead)
• GDV 5%
• Rental income 5% plus 1–2 month void
• Interest rate up at refinance

If your profit disappears under mild pressure, the deal isn’t stacked, it’s fragile however, strong deals still work even when the project gets annoying.

Example: a stacked vs unstacked project

Unstacked example (looks good until you model it):

• Purchase: £600k
• Build + fees: £350k
• Finance/holding/sales costs: £80k
• Total cost: £1.03m
• GDV (sale): £1.10m
• Profit: £70k (before tax)

Now stress it:

• Costs +10% = +£35k
• GDV -5% = -£55k Suddenly your profit is basically gone.

Stacked example (built to survive real life):

• Purchase: £600k
• Build + fees: £420k (realistic spec + compliance + contingency baked in)
• Finance/holding/sales costs: £100k
• Total cost: £1.12m
• GDV (sale): £1.35m
• Profit: £230k

Stress it:

• Costs +10% = -£42k
• GDV -5% = -£67.5k You still have meaningful margin and options: hold, refinance or sell, without panic.

The part investors forget: the tax and structure layer

A deal isn’t just “numbers”, it’s after-tax outcomes and future flexibility. Your structure (personal vs LTD), VAT considerations, SDLT position and how you plan to extract profits can change what “good” looks like.

And if you’re building bigger – portfolio growth, group structure or future relocation – this is where strategy starts to matter. Even alongside things like SSAS pension planning or cross-border admin like Dubai business setup.

Let’s Map the Smartest Next Step

If you’ve got a commercial-to-resi opportunity and you want a proper verdict, we’ll help you model the deal, stress-test the assumptions and structure it to protect your wealth.

Working with GoldHouse means fewer surprises, clearer decision-making and a plan built for time freedom, reduced tax stress and long-term legacy – so your property journey doesn’t turn into a full-time job you never applied for.