Land developers and builders who want to sell you a house or a lot will try to sell as many parcels as possible. It is time-consuming to sort through all the parcels to find those that are worth considering. Buyers need tools to help them quickly eliminate the junk and select the parcels which deserve further consideration. Typically, buyers use formulas and rule of thumbs to do their preliminary screening.
These guidelines are meant to give rough estimates of the site's yield and the different cost factors, because they are key elements in determining the "right" amount to pay for the property. By defining the price at which the numbers work, land buyers can see within minutes if the seller's asking price is realistic. The buyers will simply throw out the parcel if it is overpriced.
Commercial Land Developments
The method used to estimate site yields and improvements costs for non-residential and residential land development is different. For office or retail parcels, yield is the total amount of space that can potentially be built. This is usually a factor of the amount of parking space that will fit in the parcel. For example, one rule of hand might be used for estimating the total area of land required to park each vehicle on the property. Another would approximate the amount of land area taken up by sidewalks and walkways. Thirdly, a rule of thumb could assume that vertical and horizontal improvements Land Development near me will cost $100/sq. The office space should be at least 100 sq. ft.
Residential Land Developments
The rule of thumb that is applied to residential land development will be to estimate both the cost and number of building parcels the parcel would produce when the subdivision has been completed. The value for each "raw", unimproved building lot will be determined by the sale price projected of the finished house and its lot, as well as the costs associated with improvements.
The site yield rule might be to subtract the total land area from the parcel and then divide that by the minimum size lot required by zoning in order to arrive at the number lots. As an example, a 15-acre vacant parcel zoned at 20,000 sq.ft. might be calculated as follows. ft. lots:
Step 1: 43,560 sq. ft. x 15 acres = 653,400 sq. ft.
Step 2: 653,400 sq. ft. x 70% = 457,380 sq. ft.
Step 3: 457,380 sq. ft. divided by 20,000 sq. ft. = 22.87 building lots
This parcel would have approximately 22 building lots. The second step involved subtracting 30% of the total site area to account for waste, lost square footage due to natural constraints (e.g. slopes, floodplains, irregular shapes) and the land area taken up by the new roads within the community.
Be aware that local rules of thumb will vary. You should not apply these rough calculations blindly. They are only rough guidelines. It would not make sense to subtract only 30% of the gross site area if a large portion of the parcel is in floodplain. If you're unsure what rule of thumb to apply, go conservative.