How to Calculate Your Lot Value

Calculating your lot value can be a tricky business and the uncertainty that comes along with not knowing can have consequences when selling.

But whether you’re a new property owner or has already had your fair share of properties over the years, there’s one thing you have to remember: it’s all about the location. Your lot’s location will play a huge role in its actual value.

Even without the help of a real estate appraiser, you can find out your lot’s actual value by performing a land residual analysis. Here’s how to do it:

  1. Determine its potential final market value.
  2. Subtract construction hard costs and development soft costs as well as the developer’s profit from it.
  3. This would be your actual lot value.

Nevertheless, if there is an existing property on the land, this can also affect the overall value of your land. It may not be much but it would certainly be a mistake if you don’t factor in the value of your house or building when calculating your lot’s actual value.

Why should I estimate my lot value?

Establishing your lot value provides you with the confidence and control over your property taxes as well as the sale of your property. Many lot owners hire professional appraisers to estimate their lot’s actual value.

What if it is a vacant lot?

You might think that it is easier to appraise the actual value of your lot if there are no current structures on it, but it’s quite the opposite actually. If you have an existing house or building on your lot, it gains more significant value and purpose.

So before calculating your lot value, you have to determine first its main purpose.

1. Survey the land

Determining its exact location and size is the easy part. What’s more important is the amount of street frontage it has as well as its existing topography.

With the help of a surveyor, you can find out exactly which area of your land is the best place to build a house or building. Don’t forget to determine the expenses that come with when you have to develop or improve your land for a specific purpose – residential, commercial, etc.

2. Maximize its strengths

Two identical pieces of land can have a huge difference in terms of its actual value depending on its potential usage. Then again, it won’t be entirely up to you to know how you can take advantage of your lot value.

The first and most important thing to do is to check its zoning – whether it would be best to be utilized for the construction of a high-rise building, a multi-level family house, or if it is positioned to be one of the public areas such as a park.

The second thing to do is get the services of a land-use attorney to help you apply for a change in zoning code for your lot so you can have a more profitable use for it – the legal way.

3. Compare it with other properties

Look at the sale of other comparable properties so you can have a good idea of its price per square foot in the current market, and not just its total selling price.

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