How to value commercial land

[David M.]

Hi, Does anyone have a good rule of thumb or methodology to value commercial land? I have a friend who has received an offer for a lot he owns in downtown Tacoma, WA. I am trying to help him determine the market value. Thanks.

[David M.]

Thanks, @James C. I think we figured it out. We estimated it by determining highest and best use of the land (1-3 bedroom apartments) and estimating the income that would generate. From that we used the cap rate to estimate the value of the hypothetical apartment building. We then estimated construction costs and subtracted them (along with developer profit) to estimate the value of the land. I think we got pretty close and a local commercial appraiser has concurred with the estimate. Still negotiating with potential sellers.