Land buyers who are looking to buy land in order to "develop" (as this term is defined in these Land Development Values articles) it or build on it to sell the whole package (e.g. a home built on its lot), have to sort through many parcels, because everyone wants to sell them something! It is time-consuming to sort through all the parcels to find those that are worth considering. Buyers need tools to help them quickly eliminate the junk and select the parcels which deserve further consideration. For preliminary screening, most buyers rely on formulas and simple rules.
These rules are designed to provide rough estimations relating to yields of a site, and different cost elements because these are the most important aspects when calculating the price that they should pay. Land buyers will be able to tell within minutes if an asking price is reasonable based on the number of numbers that work. If the land parcel is substantially overpriced, the buyers can simply discard the property and move on to better prospects.
Commercial Land Developments
As is to be expected, the methods for estimating site yields and costs of improvements are different for residential and commercial land developments. For office or retail parcels, yield is the total amount of space that can potentially be built. This is usually a factor of the amount of parking space that will fit in the parcel. You can use a simple rule to estimate the area required for each parking space and drive aisle on your office property. Another would approximate the amount of land Land Clearing near me area taken up by sidewalks and walkways. Thirdly, a rule of thumb could assume that vertical and horizontal improvements will cost $100/sq. ft.
Residential Land Developments
The rules of thumb applied to residential land developments would be designed to estimate the number of building lots that the parcel could produce once the subdivision had been completed, and the cost for horizontal improvements. The "raw" value of each building lot is calculated using the estimated sale price of the house on the lot and the cost of improvements.
One site yield rule of thumb might net out of the gross land area of the parcel the amount of square feet that would be wasted or couldn't be used for whatever reason and then would divide the result by the amount of the minimum lot size required by the zoning to come up with the number of lots. This is an example of how the rule-of-thumb calculation would look for a 15 acres vacant parcel zoned to 20,000 sq. ft. lots:
Step 1: 43,560 sq. ft. x 15 acres = 653,400 sq. ft.
Step 2: 653,400 sq. ft. x 70% = 457,380 sq. ft.
Step 3: 457,380 sq. ft. divided by 20,000 sq. ft. = 22.87 building lots
The final result is always rounded down, so there would be roughly 22 building lots for this parcel. In the second stage, 30% of gross site area is deducted for waste, natural constraints such as slopes, flooding, and irregular shapes, plus land that will be used by new roads.
You should be aware that there are different rules for each area. They are rough estimates so you should modify them as circumstances warrant and not just apply them blindly. A substantial portion of a 15 acre parcel would have to be in floodplain for it to make sense to take only 30% off the total gross site. Be conservative if you don't know what rule to use.