Land Development
Land development
is the process of preparing raw land for the construction of improvements.
Property value is determined by its highest and best use. A piece of property that can be developed into a regional shopping mall will be more valuable than a property that can only be developed into a single family home. This is because the end use of the former has a much higher finished value than the latter. The value of the materials are more and the expected income from renting or owning the first is significantly more valuable than the second. It all comes down to profit and a return on investment. Generally speaking there is more profit to be made in larger commercial buildings than a single family home. However, the commercial property takes significantly more risk and money to develop.
There are six steps in the process of development.
Feasibility
Acquisition
Design
Financing
Construction
Marketing
Highest and Best Use
The highest and best use of a piece of land is determined by answering four questions in the following order:
Is your proposed project legal?
Can it be built practically on your site?
Will your project generate the desired return?
Does the proposed use represent the use that will deliver the maximum return?
When developing single family homes, find an area that allows that kind of home to be built. Determine the allowed sf to build on two stories, that style home must be able to be built practically on our site. The goal is to return a profit of 30% on the cost, to be able to sell the property for at least 30% more than what it will cost to build it.