Find the residual land value
The land price at which the project meets your targets.
Sub-phases, which let you solve for part of the project, are on Pro and Team; Free solves for the whole project.
The residual land value is the most you can pay for a site and still meet your return targets. Feaso Cloud solves it for every target you set, so before you make an offer you can see the price that delivers 20% on cost, the price that delivers your equity IRR, and how far each is from the price you’ve assumed.
Before you start
Build the feasibility first: program, costs, revenue and finance. The residual land value is only as good as the rest of the model.
Enter the land on the Costs tab under Property purchases, with its Purchase price. If you haven’t agreed a price yet, enter your best estimate; the residual land value is shown against it.
Step 1: Open the Project returns table
Open the Summary tab. The Project returns card lists Profit, then each return metric, with the columns Metric, Actual, Target hurdle, a status, and Residual land value. The Current land price at the top right is the total of your property purchase prices.
Step 2: Enter your targets
Type a target into Target hurdle for each metric you care about:
- Return on Cost (RoC), %
- Return on Equity (RoE), %
- Project IRR, %
- Equity IRR, %
- Peak equity, in dollars, as a maximum
Each target shows Meets or Below against the actual figure (or n/a when there is no actual). For peak equity, meeting the target means staying at or under it. Leave a target blank to skip it.
Targets belong to the scenario: they are saved with it, and each change is recorded in History.
Step 3: Read the residual land value
For each target, the Residual land value column shows the total purchase price at which the project exactly meets it, with the difference from your current land price underneath, for example “$8,450,000” and “−$1.3m vs current land”. It shows Calculating… for a moment after each change.
Two other results are possible:
- Not achievable: the target is missed even with the land at $0.
- A figure such as “> $40,000,000”: the target is still met at that price, the highest Feaso Cloud tests.
Stamp duty, and any loan limit sized from the land price or costs, are worked out again at each price tried, so the figure is a price you could pay with its duty and finance included.
Step 4: Choose the phase it solves for
Use Report returns for, above the cards, to choose Whole Project or one of your sub-phases. The returns, the hurdle statuses and the residual land value all follow the selected phase, counting costs, revenue and returns within that window only.
To add sub-phases, open the Program tab and click + Add Sub-Phase in Feasibility Phases (Pro and Team). On Free, the selector offers Whole Project only.
Step 5: Test the price
Go back to Costs, change the Purchase price to the residual land value for your main target, and return to Summary. The target should now show Meets, with the actual figure on the target. Change the price back, or keep it, and save each version you want to keep as its own scenario.
Tips
- Set several targets at once. The lowest residual land value is the one that binds, and the gap between them shows which hurdle is hardest to meet.
- With joint-venture partners, the residual land value is for the whole project. It is hidden when you view returns as You or a partner.
- The sensitivity table on the same tab includes a Land price axis, to see how returns move around the price you’re considering.
- Record the residual land value with the offer. A saved scenario keeps the inputs and targets that produced it.