VALUATION GUIDE
How to Calculate Residual Land Value
Residual land value is the completed project value remaining after non-land costs and required developer profit.
In this guideWhat the analysis measuresCalculation frameworkUnderwriting reviewHow to use the result
What the analysis measures
Use net realizable development value and a complete cost budget. Separate land acquisition costs because they change with the land price.
Calculation framework
Select profit on cost or profit on value and apply the correct algebra. State the convention beside the result to prevent silent mixing.
Underwriting review
Run value, cost, timing and financing sensitivities. The residual is highly geared to small changes in the project assumptions.
How to use the result
A negative residual is economically meaningful: under those inputs, the project cannot support a positive land payment and the required return.