Financial Calculators
Financial calculators are sophisticated electronic devices or software applications meticulously designed to execute various financial calculations and resolve intricate financial issues with precision. Widely utilized by individuals, students, professionals, and businesses, these calculators serve as invaluable tools for financial planning, investment analysis, and decision-making. Their utility is particularly evident in tasks involving complex financial concepts such as time value of money, internal rate of return, and cash flow analysis.
In the world of real estate development, figuring out how much to pay for a piece of land is really important. Experienced developers often use a method called the Residual Land Valuation Method to help them decide. It’s like a math formula that goes like this:
Land Value = How much you can sell the property for – How much it costs to develop – How much profit you want to make
Let’s say there’s a 500 square meter piece of land for sale in Lekki Phase 1, and it costs ₦7,000,000. After doing some research, you decide you want to build a 3-bedroom house. These houses sell for ₦50,000,000, and it will cost ₦35,000,000 to build it. You also want to make ₦10,000,000 in profit. So, you use the formula like this:
Land Value = ₦50,000,000 – ₦35,000,000 – ₦10,000,000 = ₦5,000,000
According to this method, the most you should offer for the land is ₦5,000,000. If you pay more, your expected profit goes down. If you pay less, your profit goes up.
Download our free model here in excel which you can use to figure out the right purchase price for the land you’re interested in.
We are currently working diligently to integrate this powerful DCF forecasting tool into our platform. This will empower users to analyze and value properties and land investments based on their own assumptions and preferences. By inputting your own data such as expected rental income, property expenses, growth rates, and a personalized discount rate, you will be able to assess the financial feasibility of real estate investments in Nigeria and arrive at the appropriate offer price.
This tool will provide valuable insights and enable informed decision-making for both seasoned investors and those new to the real estate market in Nigeria, helping them make well-informed investment choices in this dynamic and promising sector. Stay tuned for our exciting new feature!