Investment Land Feasability
- Land Location |
- How to Buy Land |
- Land Features |
- Investment Timing |
- Opportunity Costs |
- Community Acceptance |
- Single Lot Investments |
- Residential Lots |
- Speculative Lots |
- Lease vs. Resale |
- Building to Suit |
- Acreage |
- Acreage for Resale |
- Land Evaluation |
- Land Promotions |
- Land Bankers
Land Evaluation
The evaluation of raw land depends to a great degree on its future, rather than its present, use. Thus, an investor must be able to predict the type of eventual use as well as the time when this use will become feasible-not an easy task.
The most popular basis for evaluating land is the comparative approach, whereby similarly zoned parcels of greenbelt land that sold recently are said to establish the value. This is after adjustments have been made for location, size and date of sale.
A more comprehensive approach is advisable, because the existing zoning of the greenbelt land may not be its highest and best future use. The time value of money also must be considered. Careful attention should be paid to an opinion of future use by analyzing the area's demographics, employment centers and traffic counts. This information would form a basis for projecting the number of acres that would be in demand for each use classification (i.e., residential, business, industrial and so on.
In addition, a careful forecast should be made of when the property will be ready for development. The factors to consider in this analysis include supply, demand, availability, growth patterns and distance from existing development. Some effort should be made to project building costs and rents to estimate what a developer might pay for the land in the future.
Finally, to derive the present value of the greenbelt land, an appropriate investment return must be established. When improved properties are being sold for close to a 10 percent capitalization rate on an all-cash basis, raw land requires the investor to double this figure to account for the increased risks involved. Thus, a 20 percent annual return requirement should be applied to project the future sale price.
- Land Location |
- How to Buy Land |
- Land Features |
- Investment Timing |
- Opportunity Costs |
- Community Acceptance |
- Single Lot Investments |
- Residential Lots |
- Speculative Lots |
- Lease vs. Resale |
- Building to Suit |
- Acreage |
- Acreage for Resale |
- Land Evaluation |
- Land Promotions |
- Land Bankers
