Glossary
Residual land value
Residual land value is the most a developer could pay for a site while still achieving a target profit, calculated by subtracting all other development costs and the target profit from expected revenue.
An example
A developer works backwards from the expected sales of a proposed project, deducting construction, fees, finance and a target margin. What remains is the residual land value, which guides their offer for the site.
Why it matters
If the asking price is above the residual land value, the project may not achieve the target return. The calculation is sensitive to every assumption, so it is worth testing a range of inputs.
Points to check
Residual land value is sensitive to sale price and cost assumptions, so test different scenarios rather than relying on one figure. Check that your target profit reflects the risk of the project and what lenders expect. Compare the result with the asking price of the site. The feasibility calculator shows residual land value alongside profit and margin, with all results as estimates only.
Try it: Development feasibility calculator