How to determine value of land

[Gregory Breeden]

Aside from a realtor what tools do you all use to determine the value of land? Is there anyway to find the value of land on prop stream?

[Bryant Brislin]

I'm a land broker in Southern California who sells various types of deals.  From larger pieces to the big homebuilders or multifamily developers, down to smaller pieces of land to small investors.  For land that homebuilders are buying, it's all about running a proforma to figure out a residual value.  Comps do and don't matter to them. It's always good to know, in general, what others are paying for dirt in that sub-market, but when it comes to new development, every piece of land is so different (i.e. some may have utilities right at the site, and some may have to have utilities dragged down from a block away), that there is never really an apples-to-apples comp.  So to make it more simple, the builders like KB Home, Lennar, et al determine what they would pay for a "finished lot", i.e. if they know they can sell a home for 400k in that market, they may say that they can pay 170k for a finished lot and then work backwards to figure out what the paper lot (an unimproved lot with an approved or recorded map) is worth.  So if the city fees are 50k and the total hard costs (grading, utilities, etc) are determined to be 75k per lot, then you are left with 45k/lot that you can pay to the seller.  Now for pieces of land that investors are buying to just sit on, then yes, you can pull multiple comps in the area and basically determine an average price-per-acre that people are paying, assuming the zoning is the same/similar, topography is similar, etc.  For multifamily land deals, especially in more urban infill type locations, those are usually underwritten with a proforma or cash flow model, and they underwrite more to a "return on cost", as opposed to a for-sale homebuilder play where they are underwriting to a profit margin.  But, yes, land is the toughest asset class there is to value, and appraisers call me all the time asking for help.