The subdivision development method is most appropriate for valuing which kind of holding?

Correct Answer

D) Raw acreage that can be divided and sold as lots

Why this is correct: The subdivision development method values land based on its development potential. It estimates the future sales proceeds from selling individual developed lots, subtracts all development costs and entrepreneurial profit, and discounts the net income to present value. This method is only applicable when subdivision is the highest and best use. Why the other choices are wrong: "A single infill lot in a built-out neighborhood" is wrong; this lot is already a finished lot, so the development model doesn't apply. "A leased site under a long-term ground lease" is wrong; this is valued via income capitalization. "An improved property being valued as vacant land" is wrong; the extraction or sales comparison method would be used. "Raw acreage that can be divided and sold as lots" is correct. Exam tip: Subdivision method = for raw land that can be profitably subdivided. Think future lot sales minus costs.