How to Price A Residential Subdivision

On today’s show we are addressing a diversity of opinion on how valuation is determined for land in residential subdivisions. We recently had a builder assert that our pricing was too high for residential lots in a subdivision.

At the same time, we have also been successful in developing residential lots and selling them in the marketplace to builders across multiple markets.

When we price our land, we always perform residual land value analysis as part of our due diligence.

We put ourselves into the shoes of the home builder and reverse engineer their cost structure.

So if we are talking about a single family home subdivision, we subtract the builders profit from the retail price, then we subtract the hard cost of construction, the soft costs like permit fees and insurance, interest reserves, the builders general conditions. What’s left over is the price that the builder can pay for the land and still have a profitable business.

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