Real Estate Development
Question for people in development, how do you make land pricing recommendations for a potential acquisition? After finding the cost of the project you are trying to build.
Trending Content
Career Resources
WSO Free Modeling Series - Now Open Through
May 31, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
You can figure out what YOU are able to pay for the land by backing into the residual land value based on your desired return metric (typically IRR) - what I mean by that is you'd have an input for the land cost and use goal seek to set it equal to an amount that results in your return metric being equal to X, where X is your minimum return threshold for a deal to pencil. That's your maximum purchase price under your assumptions.
From there you can gauge that against what market rates are for that type of land and see if there's some wiggle room for savings (hint: if there isn't you probably shouldn't buy it).
Commodi totam nihil hic est distinctio ipsam alias. Suscipit voluptatibus beatae iste. Molestias molestiae in officiis magnam. Quo maxime hic corporis quia. Consequatur aut sint magnam incidunt quo.
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...