What Is Residual Land Value?
Residual land value (RLV) is the amount left over after subtracting all development costs and required profit from a project’s completed value. It answers the critical question every developer faces: “What’s the maximum I should pay for this site?”
Unlike comparable sales valuation—which looks at what similar land has sold for—RLV works backwards from your specific development assumptions. Two developers might calculate different residual values for the same site based on their construction costs, target margins, and proposed schemes.
The core formula is straightforward:
RLV = Gross Development Value − All Costs − Developer’s Profit
Getting each input right is where the complexity lies. Underestimate construction by 10% and you’ve overpaid for land by that same amount. Apply the wrong GST treatment and calculations shift by $100,000+. Use unrealistic margins and your bank will reject the feasibility.
For a deeper dive into methodology, cost benchmarks, and worked examples, see our complete guide to residual land value in Australia.
How This Calculator Works
This calculator uses the static residual method—the most common approach for quick feasibility screening and smaller to medium-scale projects.
Enter your expected sale values, construction costs, fees, and target profit margin. The calculator works backwards to determine what’s left for land acquisition.
Best suited for:
- Initial site screening and comparison
- Duplexes and townhouse projects
- Small to medium apartment developments
- Quick feasibility checks before detailed analysis
For complex multi-phase projects over $15 million, discounted cash flow analysis with monthly modelling is typically required.
Key Inputs Explained
Gross Development Value (GDV)
The total expected sales revenue from your completed development. This should be based on comparable sales evidence—recent settled prices for similar properties in the area, not listing prices or optimistic projections.
Tip: Banks typically haircut developer GDV assumptions by 5-10%. If your feasibility only works at your expected GDV, the margin probably isn’t sufficient.
Construction Costs
Total hard costs to build the development, typically expressed per square metre of gross floor area. Current 2024-25 benchmarks for medium quality:
| Building Type | Cost/m² (ex GST) |
|---|---|
| Townhouses | $3,100–$3,500 |
| Low-rise apartments | $3,200–$3,800 |
| Mid-rise apartments | $3,800–$4,500 |
Always verify with a quantity surveyor for projects over $2 million.
Professional Fees
Architect, engineer, project manager, and other consultant costs—typically 6-12% of construction costs depending on project scale and complexity. Smaller projects attract higher percentage fees.
Finance Costs
Interest on development finance, capitalised over the construction period. Current senior debt rates range from 6.5-10% depending on lender type. The calculator estimates this based on your construction period input.
Developer’s Profit
Your required return for taking on development risk. Industry standard is 15-20% profit on GDV (or 18-25% on costs). Banks typically require minimum 15% on GDV for finance approval.
Contingency
Allowance for cost overruns and unforeseen issues. Typically 5-10% of construction costs depending on design stage and project complexity. Don’t skimp on this—it’s what protects your margin.
Stamp Duty
State transfer duty on the land acquisition. Select your state and the calculator applies current rates. This is a cost that reduces your available RLV—a $5 million site in Victoria incurs approximately $290,000 in stamp duty.
GST Treatment
For residential development, the margin scheme may apply if you’re acquiring from a non-GST registered vendor. This calculates GST only on the margin (sale price minus original land cost) rather than the full sale price—potentially saving $50,000-$150,000+ on typical projects.
Understanding Your Results
Residual Land Value
The maximum you should pay for the site given your assumptions. This is a ceiling, not a target—prudent developers negotiate below RLV to build in margin protection.
Negative RLV? The scheme doesn’t work at current assumptions. Either reduce your land price expectations, increase GDV (better product/location premium), reduce costs, or accept lower margins.
Effective Land Rate
RLV expressed per square metre of site area or per unit—useful for comparing opportunities across different site sizes.
Sensitivity Analysis
Small changes in assumptions can dramatically affect RLV. A 5% GDV reduction or 10% construction cost increase might eliminate your entire margin. The calculator shows how your RLV changes across different scenarios.
Important Limitations
This calculator provides estimates for initial feasibility screening. For acquisition decisions, you should:
- Verify construction costs with a quantity surveyor
- Confirm GDV assumptions with comparable sales evidence and agent appraisals
- Check development contributions with the relevant council
- Validate planning assumptions through pre-application advice
- Model cash flows for projects over $10 million or 18+ months
- Obtain independent valuation for finance applications
Results should not be relied upon for making offers or financial commitments without professional verification.
RLV vs Market Value
Residual land value and market value often differ:
| RLV | Market Value |
|---|---|
| What your scheme can support | What buyers will pay today |
| Calculated from assumptions | Based on comparable sales |
| Specific to your project | Reflects general market |
When RLV exceeds market value, there’s development opportunity. When market value exceeds RLV, the scheme may need redesign or the asking price is unrealistic for your intended use.
Frequently Asked Questions
What profit margin should I use?
Banks typically require 15-20% profit on GDV for development finance. Target 18-20% for standard projects, higher for complex or speculative developments. Below 15% leaves little buffer for cost overruns or market softening.
How accurate is this calculator?
For initial screening and site comparison, the calculator provides reliable estimates. For acquisition decisions, verify all inputs with professional advice—small assumption errors compound into significant RLV differences.
What about holding costs like land tax and rates?
For projects under 18 months, holding costs are often minor relative to other costs. For longer projects, add estimated holding costs to your “other costs” input to capture land tax, rates, and other time-related expenses.