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Create lots calculated

who determines the minimum lot size so this minimum lot size this is decided by the local Planning Commission typically or whatever local government is basically in charge of creating these zoning ordinances so for that minimum lot size that's going to be established by the government some form of the government depending how high up it is depends on the local area it is that you're in but the government basically saying okay every lot has to be at least this large now you might be an area that doesn't have a minimum lot size for this but most areas do especially if it's a place that is being actively developed a lot of these master-planned communities they'll have this and what has to happen with this is we would basically lay out what this is going to look like with all of our our Lots that we are gonna develop in our neighborhood here we would basically lay that all out on what's called a subdivision plat map and we would submit that plat map to our local Planning Commission and then one of the things that they're looking for on there to make sure before they approve this is doesn't meet the minimum lot size and so this is why it's important as a developer to understand this calculation here because what you're trying to figure out is okay how many Lots can I fit in there and then you can use that to determine okay I could sell these Lots in this area for probably about X amount of dollars how much return on investment it is that I can expect for this particular property so let's go ahead and go about solving this here so we've got 160 acres we've got 30 percent is unusable we've got a 12,000 minimum square footage for each lot so what we have to do first because this isn't square feet and then this isn't acres we're dealing with difference terms here so we have to turn that into the same unit and in order to turn acres into square feet we've got 160 acres and we're gonna go ahead and multiply that by the magic number of 43 560 43,560 that's the four old ladies going 35 in a sixty or four and three or seven five and six is 11 whatever it is that you use to remember 43,560 that's definitely important not just a good thing to know but also for your a real-estate exam if you're using these videos to study for your real estate exam this is a very likely question you could see on your real estate exam in this 43,560 number that's what I going to show up in your exam one way or another so make sure you've got that down but basically what we're doing here again is figuring out how many square feet it is that we're dealing with here so let's take the 160 acres multiplied by 43 560 and we get six million nine hundred and sixty nine thousand six hundred square feet so that's how many square feet it is that we have to develop here now every lot has to be at least twelve thousand square feet but can we put Lots on all 160 acres the answer is no we have 30% that's going to be for our streets open green spaces things like that so what we need to do now and if you imagine this kind of like as a pie chart imagine as a pie chart so if we have 30 percent that's unusable that leaves us with 70 percent that is usable both of them add one hundred seventy thirty hundred percent so whatever's left over is what we have that's usable 70 percent usable for developing Lots 30 percent unusable so we're going to do is take the six million nine hundred sixty nine thousand six hundred number and multiply it by 0.7 or seventy percent and we're gonna get four million eight hundred and seventy eight seven hundred and twenty that's usable just put that up here so you've got some more space to work with four million eight hundred and seventy eight thousand seven hundred and twenty usable square feet so now that we have our usable square feet we could go ahead and just take that number and divide it by twelve thousand because every lot must be at least twelve thousand square feet we've got four million eight hundred seventy eight thousand seven hundred twenty feet overall usable so we're just going to go ahead and divide that figure out how many twelve thousand we can fit in there and we get an answer of 406 point five six so for 6.56 numbers turned out just like I wanted them to here because a very important thing to remember with this with this for 6.56 or anytime you have any sort of decimal for a number of lots so with our number of lots again our minimum lot size is 12,000 this says we'd have four hundred and six twelve thousand square foot Lots and then one lot that's maybe about 6500 square feet or so well that's 6500 square foot lot isn't gonna work that's not if you submit that with a 6,500 square foot lot on their bed you're planning to put a house on you're gonna get rejected because you don't meet the minimum lot size it's not meeting that minimum square footage so even though we're close here even if this number was let's say if was even though this was lose math didn't come out this way even if it was point nine nine we're still gonna just drop that off completely you round down always to the next whole number because you can't have any fraction of a lot even if it was 406 point nine nine nine nine nine nine nine you'd still be shorter than 12 thousand once you hit 407 that's when you have enough for another 12,000 square foot lot but any decimal here you just drop off the decimals completely at this point because you can't have any fraction of a lot so 406 would be our answer for this so I'm going to be able to put 406 lots in this community here and now let's say that so another piece of math at this here if we're trying to figure out our profitability we could have on this so we've got the 406 lots here let's say that we bought these hundred and 60 acres let's say for 1 million dollars so a cost of them was 1 million dollars it's going to cost this another million dollars let's say to develop and our development cost these going to be things like maybe getting rid of the trees that are in the area or or we're paying our engineers to generate these maps and do all the figures and all the different costs it is before you actually start building out this neighborhood that's gonna be your development cost so let's say our development cost is gonna be about a million dollars as well so we've got these two different costs here and we could basically figure out okay what our break-even point is basically our total cost that we have in here is two million dollars so that's our total cost but do we want to just break even know what's the point of all this work if we're just gonna break even we want to make a profit a certain percentage of profit let's say we want a twenty percent profit if we want a twenty percent profit we just multiply this by twenty percent twenty percent of two million is four hundred thousand so we'd have two million four hundred thousand dollars which would be our minimum selling price plus our twenty percent profit so if we got four hundred and six lots that we need to recoup two million four hundred thousand dollars for now the question comes up of okay what do we have to sell each lot for in order to get our two million four hundred thousand dollars so what we're gonna do for this year is take our two million four hundred thousand dollars and go ahead and divide this by 4 0 six and we got about five thousand nine hundred eleven dollars and about thirty three cents we just round that up to five thousand nine hundred and twelve so make sure we recruit that but yeah five thousand nine hundred and twelve dollars if we sell every lot for five thousand nine hundred twelve dollars we will make back our cost for land make back our development cost as well as get our twenty percent profit it is that they're looking for that we were looking for in this situation so that gives you an idea of okay can we sell these Lots for about six thousand dollars most markets you typically can unless we're dealing with very small lines here but twelve thousand square feet that's a decent-sized Lada almost 1/4 acre there at 12,000 square feet so that's a good size a lot for 6 grand we could probably sell it for more than that maybe on top of that where we've got license sales associates that we kind of pay them maybe four thousand dollars for every lot it is that they sell and if we're doing that then we could sell these Lots for ten thousand is that still feasible that's still something we can do these are the questions you ask based on your market and if it is okay it looks like we've got a plan here if these are accurate numbers if our plan is accurate if we've gone through and we've checked this and we've built in some buffer for the unknown the unexpected figuring a 20% profit if that's the profit that we need that's prob about the number you want to use you want to use the profit it is that you want in this scenario so when you use the profit is that you want if you want a 20% but if you still get 10% you'll still be good because it's still over and above your cost then that then then you're good because you will have these unexpected cost and and unknown elements that will pop up they'll end up costing more money with this here you are watching ask the instructor after every Wednesday at 12:00 noon Eastern Time I'm John Kriss Melvin are you watching a ski instructor [Music]