Comments on: Developing Real Estate: How to Price Land for Profit http://www.biggerpockets.com/renewsblog/2009/10/02/developing-real-estate-price-land-profit/ Learn, Network, Invest Sat, 11 Feb 2012 20:37:50 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Dean chancehttp://www.biggerpockets.com/renewsblog/2009/10/02/developing-real-estate-price-land-profit/#comment-93878 Dean chance Sat, 16 Apr 2011 13:57:42 +0000 http://www.biggerpockets.com/renewsblog/?p=7405#comment-93878 Hi Craig, great article. I have a question and have not found an easy answer. 2 lots, both equal zoning (multi family 3 stories), view, location etc. The difference is the size of he lot. One is 6500 sq ft. The other is 53,000 sq ft. Since the 53k lot offers a lot more flexibility with design guidelines etc, Is the 53000 sq ft worth more per sq ft than the 6500? Thank you. Hi Craig, great article. I have a question and have not found an easy answer. 2 lots, both equal zoning (multi family 3 stories), view, location etc. The difference is the size of he lot. One is 6500 sq ft. The other is 53,000 sq ft. Since the 53k lot offers a lot more flexibility with design guidelines etc, Is the 53000 sq ft worth more per sq ft than the 6500? Thank you.

]]> By: Craig Grellahttp://www.biggerpockets.com/renewsblog/2009/10/02/developing-real-estate-price-land-profit/#comment-75046 Craig Grella Sat, 07 Nov 2009 18:03:56 +0000 http://www.biggerpockets.com/renewsblog/?p=7405#comment-75046 The value of the house is only considered if it factors into the end use of the property.Developers will work off the highest and best use. If the highest and best use is not a single family home, then most developers aren't going to factor that house into their calcs. Even still, Brooklyn, along with most of the others areas in NY, is like its own little world when it comes to land transactions because it is not very often that land comes available there. For that reason, you might get a slight premium.One of my partners out of our Long Island office does alot of business in Brooklyn . Should you decide to part with that property I can put you in touch with him and he can probably put you together with a few investors/developers. You can contact me in the office if you go down that route in the future. The value of the house is only considered if it factors into the end use of the property.

Developers will work off the highest and best use. If the highest and best use is not a single family home, then most developers aren’t going to factor that house into their calcs. Even still, Brooklyn, along with most of the others areas in NY, is like its own little world when it comes to land transactions because it is not very often that land comes available there. For that reason, you might get a slight premium.

One of my partners out of our Long Island office does alot of business in Brooklyn . Should you decide to part with that property I can put you in touch with him and he can probably put you together with a few investors/developers. You can contact me in the office if you go down that route in the future.

]]> By: Keith McCleanhttp://www.biggerpockets.com/renewsblog/2009/10/02/developing-real-estate-price-land-profit/#comment-75035 Keith McClean Sat, 07 Nov 2009 04:50:55 +0000 http://www.biggerpockets.com/renewsblog/?p=7405#comment-75035 I was searching the web and I can across your site.I am not an investor or developer,I just have a small piece of property in Brooklyn NY that I inherited from a family member(47ft x 100ft),I have no interest in keeping the property.On the land there is a very old wood frame house (1890).My question if I sell to a developer is the value of the house worked into the equation with the land./ I was searching the web and I can across your site.I am not an investor or developer,I just have a small piece of property in Brooklyn NY that I inherited from a family member(47ft x 100ft),I have no interest in keeping the property.On the land there is a very old wood frame house (1890).My question if I sell to a developer is the value of the house worked into the equation with the land.

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]]> By: Craig Grellahttp://www.biggerpockets.com/renewsblog/2009/10/02/developing-real-estate-price-land-profit/#comment-74656 Craig Grella Tue, 27 Oct 2009 16:17:29 +0000 http://www.biggerpockets.com/renewsblog/?p=7405#comment-74656 eric, call me in the office to discuss. 206-651-4308 .-= Craig Grella´s last blog ..<a href="http://www.cornerstonesvs.com/index.php/component/content/article/6-welcome-to-cornerstone" rel="nofollow">Welcome to Cornerstone</a> =-. eric,
call me in the office to discuss.
206-651-4308
.-= Craig Grella´s last blog ..Welcome to Cornerstone =-.

]]> By: Erichttp://www.biggerpockets.com/renewsblog/2009/10/02/developing-real-estate-price-land-profit/#comment-74645 Eric Tue, 27 Oct 2009 04:55:58 +0000 http://www.biggerpockets.com/renewsblog/?p=7405#comment-74645 Hi Craig, perfect timing. I've come across a possible opportunity to purchase some land and this helps to get my mind set for the analysis. There's a couple of factors in my situation that I hope you can help me think through.What we have is that a developer in central California was going to build a large residential development. They went belly-up. Another investor acquired the whole piece (almost 100 lots, all finished and ready for a house to be built on it) for pretty cheap, supposedly for around $15k lot. He is considering selling these lots in groups of 5, at the rate of $25k per lot. Supposedly these are worth $40k a lot individually. This is where I might be a potential buyer, and so I"m trying to figure out how to analyze this on my own.so, let's say I am trying to figure out the price that a smart developer would arrive at. As I figure, 1) I should start with a probably high quality SFR would sell for on that lot at in the current environment; 2) calculate $/sf building costs; 3) back out the profit I want from the costs in order to arrive at a pre-land-profit land price, then back out the profit from the land. Does that sound about right?If a potential buyer is an investor who may one day want to build their own house, does it make sense that they would be looking for a smaller profit/equity position? How do I take into consideration that they might now want to build on it for a long time, or if they do, they might not want to sell for a long time?Thanks. .-= Eric´s last blog ..3 Secrets to Reading Housing data for the Real Estate Investor, Part 1: Understanding Seasonally-Adjusted Data =-. Hi Craig, perfect timing. I’ve come across a possible opportunity to purchase some land and this helps to get my mind set for the analysis. There’s a couple of factors in my situation that I hope you can help me think through.

What we have is that a developer in central California was going to build a large residential development. They went belly-up. Another investor acquired the whole piece (almost 100 lots, all finished and ready for a house to be built on it) for pretty cheap, supposedly for around $15k lot. He is considering selling these lots in groups of 5, at the rate of $25k per lot. Supposedly these are worth $40k a lot individually. This is where I might be a potential buyer, and so I”m trying to figure out how to analyze this on my own.

so, let’s say I am trying to figure out the price that a smart developer would arrive at. As I figure, 1) I should start with a probably high quality SFR would sell for on that lot at in the current environment; 2) calculate $/sf building costs; 3) back out the profit I want from the costs in order to arrive at a pre-land-profit land price, then back out the profit from the land. Does that sound about right?

If a potential buyer is an investor who may one day want to build their own house, does it make sense that they would be looking for a smaller profit/equity position? How do I take into consideration that they might now want to build on it for a long time, or if they do, they might not want to sell for a long time?

Thanks.
.-= Eric´s last blog ..3 Secrets to Reading Housing data for the Real Estate Investor, Part 1: Understanding Seasonally-Adjusted Data =-.

]]> By: Craig Grellahttp://www.biggerpockets.com/renewsblog/2009/10/02/developing-real-estate-price-land-profit/#comment-73423 Craig Grella Fri, 02 Oct 2009 18:13:10 +0000 http://www.biggerpockets.com/renewsblog/?p=7405#comment-73423 If you can get a handle on entitlement risk, zoning codes, and stay conservative on your exit price you can still make speculative land deals work. There is still funding out there for these deals.It gets easier if you're developing a house for yourself, from a financing standpoint, but you still want to go through the exercise. In that case you'd substitute desired equity for the profit calculations, that way you have built in equity when the property is complete. .-= Craig Grella´s last blog ..<a href="http://www.examiner.com/x-22012-Seattle-Small-Business-Examiner~y2009m10d2-New-business-entity-allowed-in-state-of-nevada?cid=exrss-Seattle-Small-Business-Examiner" rel="nofollow">New business entity allowed in state of nevada</a> =-. If you can get a handle on entitlement risk, zoning codes, and stay conservative on your exit price you can still make speculative land deals work. There is still funding out there for these deals.

It gets easier if you’re developing a house for yourself, from a financing standpoint, but you still want to go through the exercise. In that case you’d substitute desired equity for the profit calculations, that way you have built in equity when the property is complete.
.-= Craig Grella´s last blog ..New business entity allowed in state of nevada =-.

]]> By: RTShttp://www.biggerpockets.com/renewsblog/2009/10/02/developing-real-estate-price-land-profit/#comment-73420 RTS Fri, 02 Oct 2009 16:58:42 +0000 http://www.biggerpockets.com/renewsblog/?p=7405#comment-73420 As a developer I am really hesitating to invest in land now, because of the depreciation prices. Investing in land now is risky. But reading your post has given me some inspiration. I liked the calculation. Thanks. As a developer I am really hesitating to invest in land now, because of the depreciation prices. Investing in land now is risky. But reading your post has given me some inspiration. I liked the calculation. Thanks.

]]> By: Craig Grellahttp://www.biggerpockets.com/renewsblog/2009/10/02/developing-real-estate-price-land-profit/#comment-73418 Craig Grella Fri, 02 Oct 2009 16:17:28 +0000 http://www.biggerpockets.com/renewsblog/?p=7405#comment-73418 Thanks Joshua. It's pretty basic info that i think will help potential developers out there get a good handle on pricing land, even in this up and down crazy market. .-= Craig Grella´s last blog ..<a href="http://www.examiner.com/x-22012-Seattle-Small-Business-Examiner~y2009m10d2-New-business-entity-allowed-in-state-of-nevada?cid=exrss-Seattle-Small-Business-Examiner" rel="nofollow">New business entity allowed in state of nevada</a> =-. Thanks Joshua. It’s pretty basic info that i think will help potential developers out there get a good handle on pricing land, even in this up and down crazy market.
.-= Craig Grella´s last blog ..New business entity allowed in state of nevada =-.

]]> By: Joshua Dorkinhttp://www.biggerpockets.com/renewsblog/2009/10/02/developing-real-estate-price-land-profit/#comment-73417 Joshua Dorkin Fri, 02 Oct 2009 16:15:46 +0000 http://www.biggerpockets.com/renewsblog/?p=7405#comment-73417 Craig - That is an incredible introduction primer to developing. I think you're going to single-handedly ignite a lot of new interest in developing from the BiggerPockets and real estate community at large. Craig –
That is an incredible introduction primer to developing. I think you’re going to single-handedly ignite a lot of new interest in developing from the BiggerPockets and real estate community at large.

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