How do you determine the value of vacant land?

[Antonio Bodley]

Some people have said using comps to value vacant land is a good source. How do you comp vacant land in an area where there is little to no vacant land in the surrounding area? All the land in that area have homes built on them.

[Barry Ruby]

@Antonio Bodley

Comparable sales data is a standard way to determine the value of a site. However, as a developer, doing a residual analysis is a much more pertinent measure of value.

A residual analysis involves establishing the value of the highest and best use of the land and deducting all project cost together with a target development profit and commissions and closing costs from the total value,

The “residual” number represents the amount that can be assigned to land value under the project planned to be built on it.

Let me know if you are interested in using this method and I’ll send you a short pro forma that runs this analysis.