Pricing lots for sale

[Anthony Carpenter]

I am working on a pro forma for a master planned community. What I can not seem to find is a how to figure out what to sell the lots for. I am looking at 300 hundred acres to build house on. So around 1000 lots for development. Thanks for your help.

[Bill Gulley]

You need to begin with a market analysis of what is the most profitable for the project, in other words find the highest and best use.

Then design to the market needs.

Lot pricing is an art as well, the better locations as to size, location, view, being near amenities are all adjustments in pricing, usually the first few will be cheaper at an entry. You usually need to get some lots sold off quickly so that you have activity and that allows lenders to accept risks of new developments, so the first few may be much cheaper to kick start it off. Secondary market lending won't usually begin until a third to half phase is completed. A project that size needs to be broken off into smaller platted phases to facilitate financing.

Rule of thumb is that a new home sale will have about 20% of the price in the lot. That's with streets and required amenities, all utilities. More expensive homes will be about 25% but not over unless larger lots that are common in the area, like 5 acre lots or more. The additional land can't exceed 10% of the sale price without adjustments, so keep it lower to avoid problems selling.

I'm assuming residential use, you may have multi or commercial areas. You market analysis will tell you the highest and best and the possible combinations. I suggest you get with a developer, partner and give the brain damage to them, they have been there and you'll usually come out better working with pros in the beginning. you might hold back 50 acres as another project. :)