Do you
have a big plot filled with soil and debris? Or, do you want to purchase that
idle lot lying between beautifully built houses, shopping malls and
recreational centers? Most of the buyers are interested in purchasing this type
of lots, but they hesitate due to many factors. Some think that the owner will thug
them, i.e. they will charge more than the value of the plot.
In most
cases, buyers are somewhat right in their perception. Taking a raw piece of
land and then converting it into a productive property is a very hard task. But,
it is not necessary that all lots lack basic necessities associated with a good
property. If the lot is situated in the vicinity of an established community or
society with a number of houses, its value is surely going to increase sky high
once the property is built on it.
For
those who are purchasing such idle lot for first time, Dean Graziosi has shared
a formula. According to Dean, most of the expert realtors who wish to purchase such
lots use a specially designed formula. Residual Land Valuation is used to
evaluate value of empty lots and property. It is a single, straight forward way
of finding value of one-unit property.
Dean
Graziosi is an expert
realtor. He
has been working in real estate field for more than twenty years. He is a
successful entrepreneur. He has written bestselling books. Dean is a motivating public speaker. He has designed courses and
guides. These guides contain thorough and complete material on real estate. He
owns and runs a blog and online forum.
Many
aspirants and novice learn skills of real estate from Dean. Let us have a look
on Residual Land Valuation formula.
Residual Land Valuation:
In order
to calculate value of an empty and idle lot or that of any other property, one
must consider following characteristics:
- What you can build on the property?
- What will be the final value of the property?
- Compare estimated sales and costs value on the property.
- Calculate costs of sales, construction and builder.
- Compare costs and final value, the net value will be what you pay as a price of the lot.
- You can also calculate other developmental types like apartments, condos and other residential as well as commercial buildings with the help of Residential Land Valuation. However, the process will be different and complex as compare to one-unit resident properties.
- Apart from sales, construction and builders cost, there are other factors that must be considered, for example: state and city laws, local planning constraints, zoning laws, average traffic controls FAR (floor area ratio) etc.
How to Calculate RLV (Residual
Land Valuation):
As
mentioned, the process of calculating RLV of complex building types (condos,
apartments, multi storey residential or commercial buildings) is quite
difficult. However, with the help of simple RLV formula, you can calculate how
much profit you will get from a single unit residential building.
- First step is to determine type and structure of the property.
- Next, you should evaluate how much profit you will get from the property.
- After that, you must review housing marketplace. A real estate agent can help you evaluating housing market.
- Next step is to review and determine what steps should be taken in order to increase the profit on your property.
- In order to calculate net profit that you will get, based on the evaluation and analyses of all of the above mentioned factors, you must accurately estimate sales price and the price the property will cost.
- In order to get an accurate estimate, you must precisely calculate sales price and the price the property will cost.
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