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The Trouble with Rates in the Subdivision Development Method to Land Valuation

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  • Brian J. CURRY

Abstract

Valuation of subdivision land is not a one-size-fits-all endeavour. This article demonstrates the relationship between profit and yield and their application in land valuation. A subdivision development static method is suggested, and the impact of leverage, trending, and project duration on profit and yield are emphasized. The article illustrates the pitfalls of adhering to a discount rate from published studies and calls into question the applicability of discounted cash flows for short-term developments. It emphasizes that appraisals should reflect what market participants actually do in their analyses of subdivision land and that the best sources for profit, yield, or discount rates are actual developer or builder pro formas, surveys, and interviews with market participants.

Suggested Citation

  • Brian J. CURRY, 2013. "The Trouble with Rates in the Subdivision Development Method to Land Valuation," The Valuation Journal, The National Association of Authorized Romanian Valuers, vol. 8(2), pages 72-115.
    • Handle: RePEc:vaj:journl:v:8:y:2013:i:2:p:72-115
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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