Selling land to a developer/builder - establishing value

[David Brockmyre]

This is my first post since joining, so thanks for any feedback.  

I own a waterfront parcel in a great location that I want to develop into a small (10 unit) condo PUD. I would retain one of the units. My previous real estate deals were single family flips and I'm not a builder. I'm looking for input on selling to a developer. I know the entitlement and rough grade costs for this development and the market value of the future lots/units, so I'm trying to calculate a range of what a developer/builder would pay me for the entitled land before dirt gets moved. I realize costs fluctuate by market. I'm in Michigan.

Would anyone care to share how they would arrive at an asking price without just asking potential buyer's what they are willing to pay, or if a developer yourself, how do you evaluate purchases.  Any formulas you use, tips to consider, etc?

Thanks!

[Simon W.]

@David Brockmyre

Sure thing! Here's how you can calculate the asking price for the land:

1. Estimate the value of the newly constructed home: This can be done by looking at comparable properties in the area and considering factors such as size, features, and market demand.
2. Calculate the development cost: This will include expenses such as materials, labor, and any necessary permits or fees.
3. Subtract the development cost from the estimated value of the home: This will give you the land value, which can then be used to determine the asking price for the land.

For example:

• Estimated value of the newly constructed home: $500,000
• Development cost: $100,000
• Asking price for the land: $500,000 - $100,000 = $400,000

I hope this helps!

I was a Developer Controller for projects that ranged from 5 Units to 150 units.