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  How to know how much my lot is worth?  

Finding out the value of your lot / land can be tricky. Here are some things to consider when determining the value of your lot:

One way to determine a lot's value would be to perform a land residual analysis. To do this work backwards from the potential final market value, minus the total cost of the development project. The remaining dollars will determine the lot value.

1. The Potential Final Market Value

2. Minus: Construction Hard Costs
3. Minus: Development Soft Costs
4. Minus: Entrepreneurial/Developer Profit

5.  = your lot value.

For example, if a comparable completed house is worth $900,000 with the following development costs:

Construction costs of $400,000, soft costs (i.e., zoning, permitting, etc) of $150,000, developer's fee of $100,000 would result in a land / lot value of $250,000.

It is true what they say about real estate, it's location, location, location. Location will be a huge factor when determining a lot value.

Lot Value
When estimating the value of a lot, you will need to look for similar vacant lots that have recently sold. By comparing these sites and taking note of their common features, such as size, views, topography, subdivision rules, etc. You can come up with a fair idea of the current market value for your vacant lot.

QUESTION: What is the proper relationship between the cost of a lot and the value of the house on it?

ANSWER: Old rules of thumb have lost much of their meaning. It used to be that land represented about one sixth of the home’s purchase price. Then it moved up to one-fourth. It will change again as the cost of land continues to rise or fall.

Nevertheless, the land value versus house value ratio cannot be totally dismissed because it does, to some extent, affect the resale value of the property. It may not make much difference if you put an inexpensive house on an expensive lot, but it could be a mistake to have too much house for the land.

     

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