How to calculate land value?
- Thread starter capitalist
- Start date
Hey Capitalis,
Don't have one in front of me now, so I may be wrong, however most contracts (at least in the state of Vic) actually list the land component of the price seperately. Thats one way of finding out.
You can also approach your friendly local council and get a list of UCV's (unimproved capital values). These should be taken with a grain of salt however as sometimes the records can be wrong.
Thats the only ways I know - any more?
Don't have one in front of me now, so I may be wrong, however most contracts (at least in the state of Vic) actually list the land component of the price seperately. Thats one way of finding out.
You can also approach your friendly local council and get a list of UCV's (unimproved capital values). These should be taken with a grain of salt however as sometimes the records can be wrong.
Thats the only ways I know - any more?
the_captain said:
Victorian contracts do not show the land value separately, but you are correct that council rating certificates, which are attached to the contract do give an indication of unimproved land value.
I would go much further that Steve. Don't buy properties where land value is 20- 30%. Buy properties at or near land value. This increases your capital growth considerably.
So how do you work out land value in an established suburb where there is no vacant land for sale?
The way we work out the land value in a particular area is from the prices of properties that are sold where the dwelling adds little or no value to the area.
So for example I know in that East Brighton land value is $850 - $900 per sq mt. I have worked this out from recent sales of run down properties.
An old property on the average block of land of 700sq mts sells for $600,000. When people buy this type of property they tend to pull down the house and build a new home or group of townhouses. This means they do not attribute any value to the house and so they have bought close to land value.
Hi Capitalist
I gather this is the same approach as John Fitzgerald, who recommends a similar minimum ratio, or .. get as much land as you can. ie more land less house is better than more house less land.
The theory being land appreciates and buildings depreciate (although replacement costs keep going up).
eg
Total PP $260K:Land value $60 = 60/260%= 23%
Total PP $260K:Land value $100 = 100/260%= 38%
This approach tends to steer you away from units towards houses.
At the extreme you get the example MY presented, which is excellent.
eg Total PP $300K: Land value $300K = 300/300%= 100%
GarryK
I gather this is the same approach as John Fitzgerald, who recommends a similar minimum ratio, or .. get as much land as you can. ie more land less house is better than more house less land.
The theory being land appreciates and buildings depreciate (although replacement costs keep going up).
eg
Total PP $260K:Land value $60 = 60/260%= 23%
Total PP $260K:Land value $100 = 100/260%= 38%
This approach tends to steer you away from units towards houses.
At the extreme you get the example MY presented, which is excellent.
eg Total PP $300K: Land value $300K = 300/300%= 100%
GarryK
Garry K said:
Gary
What I aim for is older run down houses on reasobnable size blocks of land which have long trem development potential.
There is never any trouble letting this type of property. They have great capital appreciation and then there is the bonus of the growth through obtaining DA for mutliple dwellings.
Even if you don't go to the last step, buying older houses near land value works gangbusters
What I aim for is older run down houses on reasobnable size blocks of land which have long trem development potential.
Micheal,
I have to agree with this statement, from a speculative investment
view land size is ,imho,the important and only issue,the rental part of the process is the easy part.
good luck
willair.
Micheal,
I have to agree with this statement, from a speculative investment
view land size is ,imho,the important and only issue,the rental part of the process is the easy part.
good luck
willair.
Thanks for the info guys. Some good tips here to help me find something with a worthy land content.
This is exactly what i was pondering... how to determine land value in established suburbs where there is no vacant land to make a comparison.
Cheers and thanks again.
Mark
Michael Yardney said:
This is exactly what i was pondering... how to determine land value in established suburbs where there is no vacant land to make a comparison.
Cheers and thanks again.
Mark
Capitalist,
I have just bought an IP in Perth and went through the same issue. I did the following in order to get a feel for land value.
Got a list from the Val Gen office of past sales for the suburb (close to city, very established 1920's+) for the last 5 years ($40.00) - VGO data has land area, no bedrooms etc. etc.
Drove to each of the prior sales and had a look from the outside.
Looked at everything else for sale in the suburb and determined $/m2 (like you, no vacant land to compare, but it's a good start and if you see enough you can normally get a feel easily for what's a good house, what's a new reno, what needs a tart up versus what's a pull down).
Looked at as much as I could for sale in the suburbs surrounding, got the VGO data and again determined $/m2 - in surrounding suburbs I was able to find spare land, or land that was possible to be subdivided - I found subdivisions or potential subdivisions a great way to get a feel for land values
Note that within reason, smaller parcels of land will most often have a higher $/m2 value
I found a variance in my suburb of 665 $/m2 to 1,623 $/m2, but that's where the looking around comes in.
The above got me comfortable with paying a range toward 1,000/m2 based on certain criteria, the right 'part' of the suburb, the right type of street etc. From there and the anecdotal information I picked up from the rest of the work, I was able to judge (I hope) reasonable value.
I further had a good look at the houses that had sold in the same street and found out that a house across the street from mine sold for 1,023/m2 in April this year, but was a 670m2 block. The house I bought worked out at 820/m2, but was a 986 block with some work to do. Spoke to the owner of the 670, found out a bit about their house condition at purchase and was able to compare from there. I looked at the work I expected to do (grossly underinflated the cost no doubt!) and could then get to a comparable $/m2 on a similar condition.
In the above I also spoke a number of RE's to get their views on land values etc. I found land value was the best starting point for me.
I did this in 5 days which included a weekend as I was only visiting and had very little time.
I found it amazing how helpful people were able to be if you asked the right questions.
Hope that helps.
Cheers,
Ralph
I have just bought an IP in Perth and went through the same issue. I did the following in order to get a feel for land value.
Got a list from the Val Gen office of past sales for the suburb (close to city, very established 1920's+) for the last 5 years ($40.00) - VGO data has land area, no bedrooms etc. etc.
Drove to each of the prior sales and had a look from the outside.
Looked at everything else for sale in the suburb and determined $/m2 (like you, no vacant land to compare, but it's a good start and if you see enough you can normally get a feel easily for what's a good house, what's a new reno, what needs a tart up versus what's a pull down).
Looked at as much as I could for sale in the suburbs surrounding, got the VGO data and again determined $/m2 - in surrounding suburbs I was able to find spare land, or land that was possible to be subdivided - I found subdivisions or potential subdivisions a great way to get a feel for land values
Note that within reason, smaller parcels of land will most often have a higher $/m2 value
I found a variance in my suburb of 665 $/m2 to 1,623 $/m2, but that's where the looking around comes in.
The above got me comfortable with paying a range toward 1,000/m2 based on certain criteria, the right 'part' of the suburb, the right type of street etc. From there and the anecdotal information I picked up from the rest of the work, I was able to judge (I hope) reasonable value.
I further had a good look at the houses that had sold in the same street and found out that a house across the street from mine sold for 1,023/m2 in April this year, but was a 670m2 block. The house I bought worked out at 820/m2, but was a 986 block with some work to do. Spoke to the owner of the 670, found out a bit about their house condition at purchase and was able to compare from there. I looked at the work I expected to do (grossly underinflated the cost no doubt!) and could then get to a comparable $/m2 on a similar condition.
In the above I also spoke a number of RE's to get their views on land values etc. I found land value was the best starting point for me.
I did this in 5 days which included a weekend as I was only visiting and had very little time.
I found it amazing how helpful people were able to be if you asked the right questions.
Hope that helps.
Cheers,
Ralph
A bit off topic but this is the essence to most things in life
You nailed it in one, asking the right questions saves you both time and money, be that of investment or just run of the mill life experiences.
A policeman swept into my driveway once (after chasing me) and told me I was going 120k/hr in a 100 zone, I said "sorry officer I was not". This was well before radar. After he left my wife asked me how fast I was driving to which I answered "at least 160k/hr" but thats not what he asked me.
Knowing what to ask, thats the key and maybe the meaning of life
You nailed it in one, asking the right questions saves you both time and money, be that of investment or just run of the mill life experiences.
A policeman swept into my driveway once (after chasing me) and told me I was going 120k/hr in a 100 zone, I said "sorry officer I was not". This was well before radar. After he left my wife asked me how fast I was driving to which I answered "at least 160k/hr" but thats not what he asked me.
Knowing what to ask, thats the key and maybe the meaning of life
Hi Ralph,
Wow, it sounds like you really did your research when buying your Perth property and also seems like you also got a pretty good deal when you look at the land component - well done!!! Thanks also for suggesting the VGO data, it sounds good value for $40.
Thanks for the story David. I certainly agree that it's important to ask the "right" questions in order to get the "right" answers. Good communication is very important when trying to get to the crux of the matter.
Wow, it sounds like you really did your research when buying your Perth property and also seems like you also got a pretty good deal when you look at the land component - well done!!! Thanks also for suggesting the VGO data, it sounds good value for $40.
Thanks for the story David. I certainly agree that it's important to ask the "right" questions in order to get the "right" answers. Good communication is very important when trying to get to the crux of the matter.
Cap,
np, happy it's of help. Can't say I knew exactly what I was doing, but just learnt more as I went along.
The VGO data is generally $25 for the first 100 sales and then $0.22 per sale thereafter. They can email in excel which is very handy.
If it's Perth you're looking in, I found the following DLI contact very helpful on data:
Heather Sharp
Supervisor Client Services
Valuation Services
Phone: 9429 8567
np, happy it's of help. Can't say I knew exactly what I was doing, but just learnt more as I went along.
The VGO data is generally $25 for the first 100 sales and then $0.22 per sale thereafter. They can email in excel which is very handy.
If it's Perth you're looking in, I found the following DLI contact very helpful on data:
Heather Sharp
Supervisor Client Services
Valuation Services
Phone: 9429 8567
How about calculating a land value on a strata title property.
Say a 1000 sqm block with 2 strata properties. (500 sqm each with no common land).
The rear one has a long driveway say 100 sqm in total (25m long x 4m wide).
Let's assume the land value next doors is $1,000/sqm for 700-800 free standing houses.
Do you count the driveway?
Do you reduce the valuation because it is a rear property?
Say a 1000 sqm block with 2 strata properties. (500 sqm each with no common land).
The rear one has a long driveway say 100 sqm in total (25m long x 4m wide).
Let's assume the land value next doors is $1,000/sqm for 700-800 free standing houses.
Do you count the driveway?
Do you reduce the valuation because it is a rear property?
