Land Residual Value
A valuation method used to determine the value of land by subtracting development costs from the projected gross value of the completed project.
Land residual value is a real estate appraisal technique used to estimate the maximum price a developer can pay for a piece of land while still achieving a target profit margin. It is calculated by taking the Gross Development Value (GDV) of the completed project and subtracting all costs, including construction (hard costs), professional fees (soft costs), and the developer's required profit.
According to a press release published on Pressonify.ai, this valuation method was applied to the Goreway Towers project, resulting in a land residual value exceeding $70 million based on projected net operating income and an exit capitalization rate of 4.0%.