Methodology - Residual Land Value
I have a question to ask our fellow RE monkeys regarding residual land value.
Typically when we look at a development project, we consider today's value (as if the project is fully stabilized and operating) and the trended value (with inflation as the development will be 2-3 years out). In calculating the residual land value using the project value - development cost-profit we arrive at the land price we consider going in at. If we were to acquire the land at the residual land value, would the project value be based on today's value or the trended value (which includes all the inflation)?
Personally, given the way you set up this question... I'd only look at the residual value on "today's value", and trending land prices after development makes no sense from my viewpoint. That said..... if you mean "trended" value to be "stabilized" value (which is not how you explain it, but is what is usually meant by value 2-3 after co), then maybe some more backward intuition is worthwhile.
To be honest, backing into a residual value comes from your expected hold and required profit margin as much as anything, so it kinda shouldn't matter if the point is to figure out how much you can max pay for the dirt. If you are trying to value from an appraisal/valuation standpoint, then a bit different for sure.
Thanks for the response, typically from my firm UW perspective, both today and trended UW is “stabilized UW”. It’s just a matter of what lens are we looking at this from.
Quod rerum impedit inventore doloremque adipisci. Voluptate inventore magnam similique illo.
Rem id aut vel nostrum minima sit quis ipsam. Maxime qui dolorem minima sit reprehenderit. Facere magni maxime aut et molestiae deleniti aliquid. Atque molestiae rerum velit. Ullam maxime nobis cupiditate cumque consectetur nostrum nisi et.
Distinctio est accusamus dolorem iusto magnam nulla aut. Ex voluptates aspernatur id. Et sit est aut voluptate repudiandae quaerat.
Placeat qui dolores ducimus alias. Quod beatae optio officiis possimus est. Perferendis molestiae fuga a quo ullam et. Ratione quaerat facilis corrupti culpa. Suscipit aspernatur est iusto voluptatum ex. Voluptatem error explicabo non sint dolores inventore. Qui nam ut ipsam quis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...