How to value commercial land

Question

David M. · Answer

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.

Dave Zerweck · Answer

Hi @David Matarazzo, just ran across this post and have a similar situation - thanks for your question. I was curious if your technique for valuing the land worked for potential buyers? Did you end up finding a buyer? Anything else come into play? Thanks in advance for any insight you might be able to share.

James C. · Answer

David,

Congratulations, sounds like you have a good handle on it. Good luck getting it U/C and Closed. Let us know how it goes!

Jim

James C. · Answer

There are a couple of ways, but they both boil down to the same thing. You need to have comparable land sales. You could value it based on a ground lease, but you still have to know the comparables for ground leases.  Best bet is to check with a good commercial appraiser in the area or a competent broker.

Good luck!

Jim