RRMM Development Group
MAX LAND PURCHASE
Know what the dirt is worth before you make the offer.
We make our money when we buy.
Step 1
What will the finished home sell for?
Comp 1
Sold $/SF: —
Comp 2
Sold $/SF: —
Comp 3
Sold $/SF: —
Projected Finished Value
$0
Use renovated/new-construction comps that closely match the location, size, design, bedroom count and quality of the proposed home.
Step 2
What will it cost to build?
Step 3
Account for soft costs
Architecture, engineering, permits, surveys, legal, financing fees, loan interest, insurance, taxes, utilities, project management, marketing, closing costs and contingency.
Step 4
What will the site cost before we build?
Do not double count. If demolition, site prep or utilities are already inside your hard or soft costs, leave them out here.
Step 5
How much profit do you require?
Target 20% or better whenever possible. Below 15% leaves little room for construction overruns, financing changes or resale risk.
Max Land Purchase
-$455,400
This is the maximum acquisition price supported by the assumptions entered above.
Step 7
Asking price analysis
Step 8
Offer strategy
Opening Offer
-$387,090
Target Purchase
-$409,860
Max / Walk-Away
-$455,400
Never start negotiations at your maximum allowable land price.
Step 9
Sensitivity analysis
| Scenario | ARV | Required Profit | Max Land Purchase |
|---|---|---|---|
| DOWN-SIDE CASEARV −10% | $0 | $0 | -$455,400 |
| TARGET CASECurrent ARV | $0 | $0 | -$455,400 |
| UPSIDE CASEARV +10% | $0 | $0 | -$455,400 |
Step 10
Deal summary
PASS
The Rule
Start with the exit, not the asking price.
- Determine realistic ARV.
- Determine realistic build costs.
- Include soft costs and site work.
- Protect your required profit.
- Whatever is left is what you can afford to pay for the land.
ARV − COSTS − PROFIT = MAX LAND PURCHASE