I’m new to the board and would like to start off by saying “Hello” to everyone.
I had a question about land development and was hoping someone could help me out. Can anyone give me an idea as to how much the value of raw land increases from the recording of a plat? Lets say for example I was to purchase a property for $90,000 and record the plat in about 6 months time. What would be the added value to the property - what would be a good asking price?
If anyone could give me some ideas, I would really appreciate it.
In my area ¶, residential land is valued based on the value of the new construction (new home on its lot). If you’re selling one residential lot that’s ready to build a house on (ie, already fronting on an existing street), and the new construction would sell for $400K, in my market builders would probably pay around $130K for the lot and end users closer to $150-160K.
No one’s going to be able to answer this question adequately…there’s just too many variables.
“…what would be a good asking price?”
First: You’re going to want to know what buildable land is selling for in your region (assuming we’re even talking developed land). Then you’ll probably discount the plat if you’re selling to a builder, and/or builders. That’s all part of the negotiation process.
Use land comps in addition to a Land Residual Ratio Analysis (LRRA) to determine FMV for buildable sites in your area.
If you’re investing in a semi-rural area…the LRRA maybe less accurate than say a suburban area, and definately less accurate than an urban area.
In urban areas–where land sales are limited to tear downs if you’re lucky–the LRRA maybe the only semi-reliable method to determine land value.