Introduction
Being able to quickly work out the land value of a plot and the potential profitability at first glance is very helpful. That is, of course, if you are self-building partly to make a profit and plan on selling your home one day.
Premium Plots has created a spreadsheet which allows you to easily work out what you can afford to pay for the plot and still make the desired level of profit. The cells are linked, so if you change any values, the spreadsheet will update automatically.
To get the spreadsheet, just click the here. If you encounter any issues, please send us an email and we will send you a format that works on your operating system.
What is a Residual Land Value?
The Residual land value is calculated by subtracting all development costs associated with a project, including the developer’s profit, from the Gross Development Value (GDV). You are then left with what you can afford to pay for the plot and make your desired level of profit.
Your development profit will be reduced if the Residual Land Value is lower than what you are paying for the land. The project’s profit will increase if the land purchase price is less than the residual land value calculated.
Below, I’ll go over each of the different inputs that are listed on the spreadsheet in the green box. The spreadsheet is linked so you only need to fill in the inputs and the Residual Land Value will be calculated for you.
GDV
The Gross Development Value or GDV is the value of the completed development. I.e what will your house be worth when it’s finished? It can be difficult to know for sure but we recommend having a look on Righmove at properties on the market in a similar area. We also recommend having a look at Rightmove’s sold properties and set the timescale to the last 2 years to get the most relevant comparables.
Rightmove sold house prices link
Site Preparation
Site preparation involves several important steps that ensure that the property is cleared, graded, fenced off, accessible, and prepared for building. This will vary significantly from plot to plot. The cost of clearing any existing structures from a property is going to be higher than that of a greenfield plot. i.e., undeveloped land.
To get an idea of the costs we recommend you research the typical cost per square foot for site preparation in your area and ask for a number of quotes from local businesses.
If you’re planning on doing the site preparation yourself, get quotes for the materials, equipment hire such as excavators and include any miscellaneous expenses such as insurance, add these all up then add a contingency (such as 5%).
Site Services
Services is what you will have to pay to establish a connection, such as electricity, water and telephone/broadband, alongside mains sewerage and gas, if they are available.
For replacement dwellings, It’s likely that an existing property has connections to all of the services that are available. From here it should be just a case of calling the suppliers and explaing that you’re setting up services for a new build and provide them with the necessary details
For more rural plots this is likely to be more expensive, but again, it will be a case of calling up local suppliers and asking for quotes for the necessary services. There is a great article produced by Build It magazine that covers this in more depth below.
Connecting to services article link
Timeline for services and site preparation
On the spreadsheet, we have put the site preparation and installation of services at three months, which is longer than it will probably take. However, as it varies significantly depending on the particular plot, this is a safe bet.
Because the spreadsheet is tied to numbers, 0.25 on the spreadsheet represents three months, and 1 represents a year.
Construction Cost £/sq ft
The construction cost for the project is based on a simple calculation of the estimated house size in sq ft. This is then timesed current build costs per sq ft to give you your construction costs.
To calculate this you will need to have an idea of the size of the house you are looking to build and an up to date estimate of the current build costs. This will vary depending on the complexity of the build and how high-end your home will be.
We have added a 5% contingency to the construction costs and have assumed 6.5% of construction costs and for landscaping
Construction period
This is the total time from the beginning of construction to the completion of the project. The finance costs are linked to this so the longer you build it the higher the interest costs will be In the spreadsheet. We have set this to 18 months (1.5 years) and this again will depend on the type of house being built. If you think you can do it faster don’t hesitate to change it!
Professional Fees
Professional fees for a self build typically include the expenses associated with hiring various professionals and consultants necessary for the successful completion of the project. These fees typically include Architects, Structural Engineers, Quantity Surveyors, Planning Consultants, Legal Fees and much more.
We would advise raising the professional fees if planning issues like conservation zones and the greenbelt limit the land. Considering that planning may be more expensive.
Developers Profit
This is the percentage of GDV you will make on profit. For property developers, this typically ranges between 15%-20%. However, with the current rise in build costs and land values it can be a bit lower. What you set this to will entirely depend on your motives are as a self builder and was you deem a fair reward for your time and risk you undertake.
Contingency
Contingency describes an emergency fund put aside to deal with unforeseen costs or problems that might occur during development. This fund serves as a safety net in case of delays, overruns, or unforeseen problems.
We’ve budgeted 5% for this, which is about average in my experience. However, we advise putting the contingency higher for more riskier projects. If you adjust the percentage in the spreadsheet, which is expressed as a percentage of the building costs, the contingency amount will update automatically.
Conclusion
We really hope you have found this article insightful and it helps you on your journey to acquiring your first plot. Please keep in mind that this spreadsheet is meant to be used as a tool to assist you in determining the residual land value and is just indicative. A chartered surveyor who can value a site on your behalf is someone we would always advise getting in touch with.
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