This section introduces the units used to measure property size and to calculate land prices.
Units Used in Lot Size and Price Calculation
Land has value primarily because of its location and the use allowed on it. The value of land is usually given in one of three basic terms: square footage, front footage, or usable area.
Square Footage Price
Remember that an acre consists of 43,560 square feet. Commercial lots and building rental prices are usually quoted per square foot. To find the square footage of lot A multiply the length of the lot by its width:
193.6 ft. x 225 ft. = 43,560 sq. ft.
Say the price Is $5.00 per square foot. To find the total price of lot A, you would multiply the number of square feet by the price per square foot:
43.560 sq. ft. x $5.00 per sq. ft. = $217,800
Lot A Sample of square footage.
193.6ft. - 100ft.
25 ft. x 40 ft.
If the total price was quoted as $200,000 and the price per square foot needed to be determined, you would divide the price by the number of square feet:
$200,000 ÷ 43,560 = $4.59 per sq. ft.
To Find the square footage of lot B, you would multiply the length by the width:
100 ft. x 250 ft. = 25,000 sq. ft.
Then you need to deduct the area of the missing corner, which is a rectangle 25 feet wide and 40 feet long. To do this you must first find the size of the “missing” piece:
25 ft. x 40 ft. = 1,000 sq. ft.
And then you subtract the size of the “missing” piece from the square footage of the larger rectangle that contains the lot:
25,000 sq. ft. - 1,000 sq. ft. = 24,000 sq. ft.
This gives you the square footage of the odd-sized lot, 24,000 square feet. If the price quoted is 55.00 per square foot. you would multiply the number of square feet by this to get the total cost for the lot:
24,000 sq. ft. ± $5.00 per sq. ft. = $120,000
Thus the total price for the lot would be $120.000.
If the price for lot B was quoted as $100.000 and the price per square foot needed to be determined, you would divide the price by the number of square feet in lot:
$100,000 – 24,000 sq. ft. = $4.17 per sq. ft.
Front Footage Price
In an area where all the property is more or less the same depth, prices are often quoted per from foot, or the length of the front of the property. If lots A and B have road frontage of 193.6 feet and 100 feet, respectively, these tracts, each having more or less the same depth, could be priced per front foot. If lot A is priced at $217,800, you would find the front footage price by dividing the total price by the front footage:
$217,800 ÷ 193.6 front feet = 51,125.00 per front foot
If lot B is priced at $120,000, the front footage price would be:
$120,000 ÷ 100 front feet = $1,200.00 per front foot
The ultimate value of any vacant tract of land may depend on the investor obtaining maximum utilization of the site. The total square footage of the property generally cannot be used in its totality. Investors should be aware that setbacks (from the property line) are not the only element that can restrict the amount of usable land that a property owner ends up with. Other factors that affect the usable area of a property can include the following:
Utility easements: These areas are reserved for public utilities, usually within front or side setbacks, but they can run through a property as well.
Density allowed: Often a property that fronts along one street or avenue has a different set of requirements than its adjoining neighbor that fronts along another street or avenue.
Converting Between Different Units of Lot Size
Often it is necessary to convert between the various measures of lot size and the different methods of stating and calculating land prices.
Converting Acreage to Square Footage
One acre contains 43,560 square feet. Therefore the number of square feet in any acreage size can be determined by multiplying the number or fraction of acres by 43,560. A tract of land consisting of 0.624 acres, for example. would contain 27,181.44 square feet:
0.624 x 43.560 = 27,181.44 sq. ft.
Sections and Townships
A section is a tract of land approximately one mile square. A quarter of a section contains approximately 160 acres:
Use of the word approximately will be clarified shortly. The United States is divided into townships. Each township contains 36 sections and is a square six miles (more or less) on each side. Because of the curvature of the earth, adjustments are made to some of the sections within a township that cause a slight variation in their size. However, every property in the United States is defined within a specific section or sections located in a specific township.
Converting Square Footage to Acreage
There are times when the square footage is known and the number of acres is desired. To convert square footage to acreage, divide the number of square feet by 43,560. For example, to find the number of acres in a tract of land that is 4,000 feet by 1,360 feet, you would do two calculations. First, find the square footage:
4,000 ft. x 1,360 ft. = 5,440,000 sq. ft.
Next convert the square feet to acreage:
5,440,000 ÷ 43,560 = 124.88 acres
To find the number of acres in a lot that is 250 feet by 300 feet, you would first find the square footage:
250 x 300 = 75,000 sq. ft.
Then convert the square feet to acreage:
75,000 ± 43,560 = 1.72 acres
Calculating the Size and Price of Odd-Shaped Lots
Sometimes the odd-shaped lot is really a rectangle with one or more pieces missing. Such was the case of lot B shown earlier that had a 25 foot by 40 foot corner missing. In this example the square footage for what would be the whole lot (if the piece were not missing) is found and the missing area is subtracted from the whole. However, many odd-shaped lots are not as simple and follow property lines that are on unusual angles or curves. Signing up for a course in geometry is not necessary for these calculations, because in almost every situation you will be able to rely on one of three simple solutions.
1. Look at county deed records.
2. Tie the price to verifiable square footage.
3. Tie the price to usable area.
County Deed Records
In most areas of the United States, the local county property records contain information that is very helpful to real estate investors. One such bit of information that, when available, is usually accurate is the gross size of the property. This information may be stated in square footage or in acreage in the case of lots that are smaller than 1 acre, the acreage shown will be in a decimal fraction, such as 0.624 acres. When the area Is shown in acreage you may want to convert to square feet, and conversely when it is shown in square feet you may wish to covert to acreage.
Tie the Price to Verifiable Square Footage
Assume that an investor has done his or her due diligence and is satisfied that if a property can be bought for no more than $4.00 per square foot, the investment will be very attractive. The problem is that due to the shape of the properly, no one, including the county property record keeper of really odd-shaped property, may provide the exact square footage of the property. In these situations the investor may draw up an offer based on the seller’s estimation of the square footage but limit the offer so that it does not exceed a set price per square foot.
For example, Charlie wants to buy the north end of a block to build a medical office building. The property fronts three meandering streets and contains two wide arcs at each of two corners. The seller states that the site is approximately 4.5 acres. First, find the total number of square feet in the stated size of this tract.
4.5 acres x 43,560 sq. ft. = 196,020 sq. ft.
Charlie knows he cannot pay more than $4.00 per square foot and have the project succeed, so he calculates the total price of the property at the estimated size:
196,020 x $4.00 = $784,080
Charlie then offers $784,000 for the property ($80.00 less than the calculated price) he puts the following condition in the agreement:
Said price to be adjusted at closing to be the lesser of $784,000 or $4.00 per square foot of the actual square footage of the property being purchased. Said square footage to be calculated by a certified property surveyor.
In this provision, Charlie has set the maximum he will pay as $784,000 even if the property turns out to be slightly larger than the 4.5 acres the seller believes it to be.
Tie the Price to Usable Area
In situations when the property must be platted or when site plans must be approved, the investor may not know in advance what the end usable area will be. This uncertainty occurs because in each of these two situations local governing authorities, such as the department of transportation, school boards, environmental groups, utility corporations, etc., may require easements or dedications or additional setbacks. As this process can be long and expensive, the investor may want to have a provision that would tie the price of the land to the final usable product.
If Charlie knew that in this approximately 4.5 acre commercial site for his medical office building he needed an absolute minimum area of 4.1 acres of usable land, then he would tie the offered price to that smaller number. First, he would find the square footage of 4.1 acres:
4.1 acres x 43,500 sq. ft. = 178,596 sq. ft.
Then he would calculate the square footage price at a gross price of $784,000 by dividing this price by the square footage of the 4.1 acres:
$784,000 ÷ 178,596 sq. ft. = $4.38 per square foot
This indicates an increase to the per-square-foot price, but in the original contract Charlie had tied the final price to the usable land area that was allowed as a result of platting. Naturally, Charlie would show the price as “not to exceed $784,000.”