There are two principles to adhere to:
1) Don’t pay over the going rate in that area.
2) Have the finished project worth more than all the costs involved
Don’t Pay Over the Going Rate In that Area
In order to make sure you don’t overpay you are going to have to do some homework. Search online for all the sites available in the area. List them on a spread sheet. List the asking price and the square meterage so you can calculate the average asking price per square metre. Make an allowance for a negotiated price as opposed to an asking price. Make a note of the unique features relating to that site such as the views, orientation, whether it has mains services and anything else which you think is relevant.
This will give you a feel for what your site is worth in the market. It is not a science as each site is unique but it gives you a range of values and sense of what is achievable.
Most importantly remember that “urban” land and “rustic” land are not comparable in value because of the stricter regulations that apply to rustic land.
Remember, in a negotiation; aim to pay the least the vendor will accept rather than the most you are prepared to pay.
Have the Finished Project Worth More than All the Costs Involved
This sounds easier than it is but the principle is simple.
1) Calculate the value of the finished development
2) Take off all the costs of the building, professional fees, everything
3) You are left with the maximum you would pay for the site and if you are a professional developer you would need a profit margin too.
The main problem is that you are working with estimates. The only way to work with real figures is to get firm quotes from a builder and that means going through the entire design process with an architect. This takes time which you may not have if you are negotiating the purchase of the plot. And it takes money which is at risk if the negotiations fall through.
Author: John Wolfendale
Bio: John is a founder of Eco Vida and is passionate about bringing modern design and construction practices to Spain. He believes a home which is warm in winter and cool in summer is largely a matter of design and selective use of materials. He is British and a Chartered Surveyor with 20 years experience living and working in Spain.