Home The Residual Method

The Residual method could be used to value property with development potential or vacant land that is having its current use changed to something more profitable. When calculating land value one must take the gross development value minus the cost of development (including the developer’s profit). The residual sum is then the capital that the developer can spend on the property in its undeveloped form. This method is, quite famously, inaccurate due to number of inputs and costs that are challenging to determine, and also have a tendency to change over time.