|Development, Financial Model, Real Estate|
|Excel, IRR, NPV, Uses and Sources of Funds, Valuation|
The Residual Land Value Calculation model allows you to determine the value of a piece of buildable land from a developer’s point of view and cross-checks the results by analysing the profits and returns to the developer. Understanding the developer’s profit calculation is the key to obtain the maximum land value a developer should be willing to pay. So this model starts from the profit and return calculation from a developer’s point of view and works back to obtain the residual land value.
The financial model template allows you to put yourself in the shoes of the developer:
- What price he/she can sell the developed land/real estate?
- How much his/her development costs are expected to be?
- How much bank financing can he/she obtain?
- How long will it take him/her to develop the land?
- What profit/return does a developer require in order to do such a project?
The financial model then provides you the calculations of the cash flows from a developer’s point of view, which allows you to backsolve how much a developer should be willing to pay for the piece of land. This leads to the residual land value.
The Model comes in two version, a Free PDF Demo Version and a Full Excel model version with all cells editable.