Two people can look at the same place and come up with completely different opinions and “facts” that determine how to value it.
Although there are more than three classes of landowners, most can be broadly described as developers, speculators or small parcel farmers/passive heirs.
Each category of real estate agent has its own rating process and formulas.
Value creator
A developer is an active value creator who acquires land, plans its use, and pushes it through rights, utilities, and construction, turning green or unused parcels into building sites or communities. This starts with zoning, plating, infrastructure and government permits. It continues to deliver privileged lots or upgraded pads to builders and end users. Engineers are the plumbers on the edge of town, who siphon land from unmarketable shopkeepers and turn it into a shovel-ready product that builders can price, plan, and build against. In that sense, they are congestion and delivery engineers, aligning private capital with municipal infrastructure and demographic demand.
Cycle timer
This is in stark contrast to the role played by the land surveyor, often a “spectator” in the theater. Rather than using rights or construction, speculators buy land in the expectation that its value will increase from market growth, infrastructure, or rezoning. Then, the idea is to sell later for a bigger profit. They provide financing and price discovery by absorbing land from farmers, heirs, and small parcel owners, holding it until the market or public investment unlocks value.
In the fast-growing corridors of Texas, speculators are a significant minority of active participants, perhaps 20% to 30% of the global investor pool. However, they can dominate the most important tracts around infrastructure areas and growth areas.
Beneath both developers and speculators on the food list of global traders sits a third party.
A non-player
Farmers and heirs, who together own a large share of government land, often work without an effective development pipeline. Family-owned farms comprise more than 90% of Texas farms, and many tracts are owned in undivided- or heir-property systems that make it difficult to sell, finance or subdivide.
These landowners may lease agriculture, hold a family inheritance, or gradually consolidate parcels, but they usually do not run a cycle of rights development. On average, they may represent a relatively small share of active market participants, yet they control a large portion of the world’s domain from which developers and speculators ultimately extract.
Profit models
Residual value and projection represent two different techniques for determining the value of land, although both depend on future expectations. Let’s look at each one.
Residual value begins with the hypothesis of tangible development. The appraiser or developer estimates the total development cost of the completed project, minus construction, infrastructure, and management costs, and then deducts the developer’s profit required to arrive at the maximum value that the property can justify. This approach reinforces the valuation of measurable costs and market-based sales and rental assumptions, making it a systematic, probability-driven framework for land pricing.
In contrast, projections depend less on cost mechanics and more, and more on expected market increases, such as infrastructure announcements, geographic changes or statistical shifts.
Investors don’t buy land because they intend to build, but because they expect someone else’s development work to increase prices over time.
Simply put, the residual value answers the question, “What can I pay for this land but do the construction work?” Speculation answers the question, “How much can I pay for this land and win on market momentum alone?” Residual value is based on fact, while speculation is based on belief.
It has been held for a long time in the world
Coming off the last run, most speculators in Texas are now underwater if you use residual value as a constraint instead of pure market momentum. They buy tracts based on the expectation of perpetual appreciation. Today’s high interest rates, soft lot prices and low absorption have severely squeezed project margins.
If you use the residual land value model, subtracting the costs of construction, infrastructure, carrying, and market-based developer’s profit from the realizable sales price, the resulting maximum land price often falls below what these former buyers actually paid.
That leaves them with land that still looks good on the map, but that proves to be economically unviable under current conditions, forcing painful write-downs, liquidations or long holdings that squeeze more cash.
Now add in the carpetbaggers, groups of cultural buyers and local influencers with consolidated funds and enormous power, and you have the challenges of a slow-moving disaster. These investors have piled into the market to a high degree, using aggressive credit structures to maximize returns on speculative properties, thinking that population and infrastructure growth will keep prices rising indefinitely.
When demand normalizes or declines, their highest points become toxic.
Debt service uses cash relentlessly, lenders back out, and repayment becomes impossible without a market crash. The result is often a wave of depressed land, frozen rights, and uncomfortable political discussions with local governments about projects that can no longer be financed. Furthermore, this could drag down neighboring land values and delay a broader market reset to real surplus value.
Entering the Dallas market
Dallas doesn’t fold. The underlying data makes that clear. Population growth, job creation and low tax rates continue to support significant demand for housing and infrastructure. The market is correcting, not cratering, with margin tightening, the pace is slowing, and some parts of the world are returning to real values.
That is very different from a system crash.
Speculators who raced too far before their skis were not universally condemned. Instead, they are sorted by cycle. Those who have the money, relationships and patience to restructure debts, work with builders, or work with municipalities in rights categories can survive and emerge in this era as more ethical. For others, pain comes in the form of forced sales, write-downs and loss of equity.
The market itself continues to absorb supply at a slow, deliberate pace.
When I was looking out west with one of my bankers, he mentioned a deal he was going to finance in Melissa, Texas. Land that speculators bought for $100K per acre is now selling for $45K per acre in bankruptcy, a textbook example of how this reset plays out. I called BS when he told me the price, he even said “without bankruptcy.”
When residual value replaces pure speculation in an active market, previously oversold land is repriced to reflect what a responsible developer would actually pay after accounting for construction costs, infrastructure and market-based profits. That represents a brutal but necessary correction for speculators who bought on impulse alone.
This adjustment creates opportunities for operators to model projects ethically and work within the scope of real development. The cycle does not destroy the market; it changes the ownership from “spectators” to willing world builders and builders who can exercise rights, manage eligibility risks and deliver products in line with current demand and economics.
Back to basics
Adjusting to market changes while consistently writing down land at residual value is the key to success in land acquisition and development. Residual value forces behavior when the market is happy and provides clarity when the market is uncertain, because it binds the world to usable margins, realistic schedules, and actionable assumptions.
Keep the residual value as an anchor. Use a conservative recovery rate (if applicable). Absorption phase, and treat time as an expense, not a collection error.
If you do those things, you put yourself in a position to buy well in bubble markets, survive a normal situation, and make money on resets when the bottom line meets reality.
