how to find the value of land

Question

Hello everyone,

How do I go about finding the value of a piece of land? I had a wholesaler email me today with a large area that is almost 21,000 sf of land. It has 3 buildings on the parcel right now and he says the plot could feasibly support 11 residential houses. The address of the parcel encompasses 4 "lots" i guess you could say. its numbers are 2121-2127.

I know a few developers in the area, and there is a ton of new construction going on.  I am looking to do a double close, I buy the land and sell it to developer the same day.  It's currently priced under $40/SF.  Another parcel of a 1/4 the size has gone for $68/SF. within a mile of this particular deal.  Is $68/SF what I am looking at to sell it to a developer?

Ok so I should have searched before I posted and saw that there was a couple of good answers to value the land. Seems like it depends on my market and what neighboring land was sold for.   My eagerness got the best of me.  Feel free to reply or to inquire about buying it though!!

I would have a question about splitting up the parcel.  I understand I wouldn't have to worry about this, but I am curious and would like to know.  Is this hard to do?  I suppose a developer would be experienced with this?  The parcel has frontage on 3 different streets, 168 feet along one street, 108 feet along another, and 68 feet on another.  The 2121-2127 addresses are along the 68 foot frontage. The side that is not on a street backs up to rowhomes.  This is in philadelphia.

John Blackman · Answer

Land pricing is not just as simple as $/sqft unless the land is truly flat, uniform, not trees, has all of the necessary utilities, road access, consistent soils, and no slope.  Oh and it is all zoned for what you want to build.

Land is usually pockmarked with all sorts of these problems which make only a certain amount of it viable for building.  So to truly determine how many houses you can build on it, make sure you look at your pre-development checklist.

1) How big is the land?

2) What is it zoned?

3) Does it have any historical significance?

4) What do you have to tear down?

5) Do you have road access for all of the units?  Are the roads large enough for fire engine access and turn around?

6) What are the water and waste water requirements?  Will you need a detention pond?  What will it cost to developer the water infrastructure?

7) Can you get electric service to all of the units?

8) Is there any slope to the lot?

9) What type of soils are there?  What kind of foundations will be needed?

10) What are the setback rules for your zoning?  How much space to you have to keep between units?  In the front, in the back?

11) Are there any green space requirements? What is your building Floor to Area Ratio for that zoning?

12) Are there any CC&Rs that would restrict what you want to build?  Don't forget to check the Plat.

After you answer all of the above, you should have a pretty good idea of what you can realistically build.  Cost is an entirely different matter.

Rick Bevilacqua · Answer

Here in Pennsylvania, you should start by looking at the Zoning and Subdivision/Land Development Ordinances which vary from Municipality to Muncipality. Many of the questions on density, use, grade restrictions, setbacks etc, etc can be found in these Ordinances relative to the particular zoning district that the site is located in. This will at least get you started on the "As of Right" development potential within your designated zoning district..Potential to change zoning, obtain variances etc will be more involved, costly and risky (with great potential payoff) but it opens up a whole other conversation.

If you can develop a concept plan for the property based on Zoning and Land development ordinances, you can then estimate yield/size of building lots, comparable new construction outsale value and then work backwards from finished product costs to help determine retail value and then wholesale value of a building lot. Keep in mind that without bringing the site through all approvals, it will have a much different value as land with "potential" vs. Land that is "approved"

This is generally how it works in the PA area. It may be different in other parts of the Country...

I would verify all of the lot yield claims with the specific city authority that the property is located in and if it does truly have the claimed yield potential, you will need to figure out the probable product (and retail price) that would sell on these lots. The finished, meaning subdivided and approved lot value is typically valued as a percentage of the finished product value. This percentage varies based on buyer and market but it could be 20%-33% in my opinion but that may or may not include the site improvements (roads, infrastructure ) already being installed and in place.

After doing all of this THEN you can come up with a reasonable valuation for the dirt...

This is just my opinion and experience and others may tell you different but it's just another perspective....

Mark Redmann · Answer

for example... http://www.zillow.com/homedetails/2145-E-Sergeant-St-Philadelphia-PA-19125/117877805_zpid/

Mark Redmann · Answer

hey sorry i was editing my post when you replied.  This is in philadelphia.  the lots aren't big here

Rob Beland · Answer

Are you sure your numbers are correct? 21K SF lot with 11 houses??? Thats less than 2K SF per lot.

how to find the value of land

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