Definition
Plottage is the term used in real estate to describe the increase in value that is achieved by assembling smaller, adjacent parcels of land into a larger, more usable parcel. This is distinct from the value of each individual smaller parcel combined. The enhanced utility and potential for large-scale development raise the value, a phenomenon known as plottage value.
Examples
Example 1: Urban Development
- Scenario: A developer purchases three adjacent small plots in an urban area for $300,000 each.
- Expenses: The cost to acquire each parcel totals $900,000.
- Development: The developer demolishes existing structures on the three parcels, costing an additional $100,000.
- Resulting Value: The now larger plot of land is appraised at $1.2 million due to its higher development potential, realizing a plottage value of $200,000.
Example 2: Suburban Escalation
- Scenario: An investor buys five contiguous suburban lots, each worth $150,000.
- Total Cost: $750,000 for the individual lots.
- Aggregate Parcel: The combined parcel attracts a high-value residential developer and is appraised pre-development at $1 million.
- Calculation: The plottage value is calculated at $250,000, representing the increase in value.
Frequently Asked Questions
What is plottage value?
Plottage value is the increase in valuation that results from the combining of smaller parcels into a larger, single parcel. This is realized through improved land utility, zonal benefits, or development potential.
How is plottage different from assemblage?
While both terms relate to combining parcels of land, plottage specifically refers to the increase in value that occurs due to this combination. Assemblage is simply the process of combining the parcels without necessarily addressing the resulting increase in value.
What factors influence plottage value?
- Location: Prime areas significantly raise plottage value.
- Development Potential: Higher-density zoning or desirable use cases (like commercial buildings) increase value.
- Accessibilty: Improved infrastructure around the combined parcel boosts value.
Who benefits from plottage?
Both real estate developers and property investors can benefit from plottage. Municipalities can also see benefits through increased tax revenue from higher-valued property.
Related Terms with Definitions
- Assemblage: The process of assembling multiple parcels of land together.
- Eminent Domain: The right of a government to expropriate private property for public use, usually with compensation.
- Zoning: Regulation that defines how property in specific geographic zones can be used.
- Easement: A right to cross or use someone else’s land for a specified purpose.
- Land Use Planning: A process to evaluate land-use efficiency and the sustainability of various land development projects.
Online Resources
References
- “Real Estate Principles: A Value Approach” by David C. Ling and Wayne R. Archer
- “The Appraisal of Real Estate” by the Appraisal Institute
Suggested Books for Further Studies
- “Real Estate Investment: Principles and Practices” by David M. Geltner and Norman G. Miller
- “Principles of Real Estate Practice” by Stephen Mettling and David Cusic
- “Investment Analysis for Real Estate Decisions” by Phillip T. Kolbe and Curtis Berger
Real Estate Basics: Plottage Fundamentals Quiz
### What is plottage?
- [ ] The physical merging of several parcels.
- [x] The increase in the value of combined land parcels.
- [ ] The process of selling adjacent parcels simultaneously.
- [ ] The fragmentation of a large parcel into smaller parts.
> **Explanation:** Plottage is the increase in value achieved by assembling smaller, adjacent parcels into a larger, more developable parcel of land.
### What does plottage value refer to?
- [x] The monetary enhancement after combining smaller parcels.
- [ ] The initial purchase price of individual parcels.
- [ ] The cost savings from large-scale purchases.
- [ ] The utility provided by any individual parcel.
> **Explanation:** Plottage value refers to the monetary gain after combining smaller parcels into a larger, more valuable one.
### What term describes the combining process of smaller parcels into a larger parcel?
- [x] Assemblage
- [ ] Eminent Domain
- [ ] Plottage
- [ ] Easement
> **Explanation:** The process of combining smaller parcels into a larger parcel is known as assemblage.
### What is a primary driver of plottage value?
- [x] Development potential
- [ ] Individual plot value
- [ ] Temporary structures on land
- [ ] Zoning limitations
> **Explanation:** Development potential significantly drives plottage value by enhancing the utility of the larger, assembled parcel for significant projects.
### Can the land plottage value be negative?
- [ ] Yes, always.
- [x] Yes, if the combined value is less than separate parcel values.
- [ ] No, never.
- [ ] Sometimes, depending on market conditions.
> **Explanation:** Plottage value can be negative if the combined parcel's value does not exceed the summed value of individual smaller parcels.
### Which of the following is NOT a benefit of plottage?
- [x] Increased property taxes right away
- [ ] Enhanced development opportunities
- [ ] Potential zoning improvements
- [ ] Higher valuation for combined parcel
> **Explanation:** While higher property taxes might occur eventually, they aren’t an inherent immediate benefit of plottage. The enhanced development opportunities and potential for value increase are more direct benefits.
### What is necessary for parcels to achieve significant plottage value?
- [ ] Individual high value
- [x] Strategic location and development potential
- [ ] Existing thorough utilities
- [ ] Presence of residential homes
> **Explanation:** Strategic location and development potential are key to achieving significant plottage value, enhancing combined parcel utility greatly.
### Who typically undertakes plottage?
- [ ] Homebuyers
- [x] Real estate developers
- [ ] Tenants
- [ ] City planners only
> **Explanation:** Real estate developers often undertake plottage to maximize the development potential and subsequent value of the assembled land.
### Can plottage be achieved without demolition?
- [x] Yes
- [ ] No
- [ ] Only under certain conditions
- [ ] Rarely
> **Explanation:** Plottage can be achieved through the combination of vacant or underutilized parcels, improving their development opportunity without the need for demolition.
### Zoning changes after plottage can influence plottage value by:
- [x] Increasing potential by allowing varied uses
- [ ] Decreasing taxes
- [ ] Limiting construction scalability
- [ ] Freezing property values
> **Explanation:** Zoning changes can increase plottage value by allowing varied and higher density uses, making the newly assembled parcel more versatile for development.
