Evaluating undeveloped/underdeveloped land potential

[Matt Zale]

Are there are any metrics for evaluating undeveloped or underdeveloped land's investment potential? Unfortunately, the 'price/sf' metric (of the structure) doesn't measure the value of the development potential, so I'm surprised Redfin or Zillow doesn't have other metrics. For example, if there's a nice 600sf 1bed/1bath cottage on 0.5 acres, with no restrictions, what's a way to measure this vs. an identical piece of land on the same street with a house of similar construction/quality but only it's 2bed/2bath and 1800sf? I haven't done my first build yet in Austin so let's say building costs are $200/sf? Any suggestions are appreciated!

[Jay Hinrichs]

Originally posted by @Bart H.:

Originally posted by @Jay Hinrichs:

generally depending on end value of home builders want to spend no more that  20 to 35% on the dirt of the total gross cost of project.

now that gets very skewed in HIgh priced markets were you might pay 2 million for a lot  ( think Palo Alto CA) and spend 750k building the home and sell for 4 million.

in reverse you have homes in Texas and other areas of the south.. that guys build for 50 a foot  sell for 75 a foot and only spend 10 to 15k for the lot.. only way to make it work

so on my stuff that sells for low of 400 to high of 700 I want to be in my lots 100 to 150k max.. and of course if I get a lot for under 100k I am SMILING  :)  Christmas came early.

 Jay, quick question, when you say 100-150K/month for the lot, is that for suburbs?  It seems as though here in dallas we are seeing a lot of houses being bought 250-350+ as tear downs.  Maybe the sales price is a touch higher, 700-900 ish. 

I am asking because we are sitting on at least two properties where I think the long term play is to tear them down and rebuild.  One is a multi family zoning just at the edge of downtown Dallas, the other in a higher end neighborhood where the house has little economic life left, its livable, but decisions have to be made soon on the roof, foundation and other parts of the structure for the long term.  And I think we might be better off as a tear down/rebuild.

 That hits the one third rule.  And of course construction 🔨 costs are usually much less in your area as opposed to our area. Age of tear down needs consideration. If u have tough lead paint and asbestos rules like we do. This can add 20 to 40k to the cost of tear down