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
Investment Land Bankers
Speculation in acreage places an investor in a somewhat passive role while waiting for values to rise to the point where profitable sales can be made.
On the other hand, development of acreage into subdivisions requires an investor to play a more active role in order to effectively market the inventory of lots. Often, investors or builders purchase raw acreage situated on the boundary of an expanding community, improve the property, subdivide it and sell lots or build houses, apartments, offices or shopping centers on the land.
A developer who improves raw land for construction purposes and maintains an inventory of lots as a function of this ongoing business is called a land banker. Besides the purchase price of the unimproved acreage, the costs of land banking include property taxes, interest, off- site and on-site improvements, engineering, site development, plot acceptance, sales commissions, insurance and costs incurred because of timing constraints. The skills, risks and responsibilities required of the land banker-developer make this a very specialized segment of real estate investment.
To begin the development process, a land banker purchases a parcel of raw land, usually 160 acres or more, and prepares plots and maps of the property designating street locations, lot sizes and the general plan for the entire proposed development.
These plots, usually drawn by licensed civil engineers, are submitted to the appropriate community regulating agencies for approval of design and zoning. After meeting local governmental requirements, including submission of a full environmental impact study, the subdivider will proceed to physically prepare the land and sell lots to both individuals and builders.
Depending on the amount of acreage involved in the development, the resulting subdivision may follow the style of surrounding neighborhoods or may acquire a distinct character of its own. Many large-scale developments include land designated for the location of a school and/or a park, including swimming pool, tennis courts, clubhouse and, perhaps, even a golf course.
Most well-planned subdivisions include a set of restrictions itemizing the type, design and quality of the improvements to be constructed on the lots therein. These subdivision restrictions are recorded and become covenants that run with the land so that each lot buyer and subsequent homeowner is required to observe these restrictions. Their enforcement becomes the responsibility of the neighborhood association formed after the project is completed.
Restrictions are designed to create an economic and physical homogeneity within a neighborhood, important for maintaining property values. By restricting lots to residential construction, incompatible uses are eliminated. By requiring a minimum square or cubic footage for each house, an economic floor is created, limiting the neighborhood residents to those who can afford to purchase a home of the specified size.
Many builders do not have the financial capacity, the expertise or the inclination to become involved in land development. Such builders prefer to leave this type of real estate investment opportunity to those with proven skill in the field. Smaller builders are usually content to purchase lots from a developer-land banker, either singly or in packages of from 5 to 50 lots, depending on their needs. The prices paid for these lots reflect the developer's cost of acquisition, preparation and desired rate of return on the investment. For smaller builders, this technique of land acquisition is much less costly and demanding than an active entry into the field of subdividing.
- 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
