Land Development Values - Guidelines of Thumb

Land buyers who are looking to buy land in order to "develop" (as this term is defined in these Land Development Values articles) it or build on it to sell the whole package (e.g. a home built on its lot), have to sort through many parcels, because everyone wants to sell them something! It is time-consuming to sort through all the parcels to find those that are worth considering. Buyers need tools to help them quickly eliminate the junk and select the parcels which deserve further consideration. Typically, buyers use formulas and rule of thumbs to do their preliminary screening.

These guidelines are meant to give rough estimates of the site's yield and the different cost factors, because they are key elements in determining the "right" amount to pay for the property. Land buyers will be able to tell within minutes if an asking price is reasonable based on the number of numbers that work. If the land parcel's price is excessive, buyers can just throw it away and move onto better opportunities.

Commercial Land Developments

As is to be expected, the methods for estimating site yields and costs of improvements are different for residential and commercial land developments. For office or retail parcels, yield is the total amount of space that can potentially be built. This is usually a function of the number of parking spaces that will fit on the parcel and taking into account the overall development limits imposed by impervious coverage and green space requirements set by the zoning ordinance. For example, one rule of hand might be used for estimating the total area of land required to park each vehicle on the property. One rule of thumb would be to estimate the land area taken by walkways and sidewalks. As a third rule, you might assume the cost of vertical and horizontal improvement would be $100/sq. The office space should be at least 100 sq. ft.

Residential Land Developments


To estimate the number of lots that a parcel of land could produce, once the subdivision was completed, as well as the cost for horizontal improvement. The value per "raw" building parcel would be calculated by calculating the value of the completed product (the home on its own lot) as well the cost for horizontal improvements.

One rule of thumb for site yield might take the gross land area, subtract all the square feet that are wasted or can't be utilized due to whatever reason. Divide the result by minimum lot sizes required by zoning and you will get the number of parcels. The rule of thumb calculation might look something like this, for example, Land Clearing near me for a vacant 15-acre parcel zoned 20,000 square feet. ft. lots:

Step 1: 43,560 sq. ft. x 15 acres = 653,400 sq. ft.
Step 2: 653,400 sq. ft. x 70% = 457,380 sq. ft.
Step 3: 457,380 sq. ft. divided by 20,000 sq. ft. = 22.87 building lots

This would mean that there are roughly 22 lots of land for this parcel. The second step involves subtracting 30% from the gross site to account of wastage and square feet lost due to natural constraints, such as slopes or floodplains.

Keep in mind that the rules of thumb may vary depending on your geographic location. The rough figures are estimates and should be modified as needed. A substantial portion of a 15 acre parcel would have to be in floodplain for it to make sense to take only 30% off the total gross site. Be conservative if you don't know what rule to use.

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