Re: How do you find the value of Land? - Posted by Bill H
Posted by Bill H on March 29, 2006 at 11:33:38:
Land is typically valued at its HIGHEST and BEST use.
That normally means what can you do with it. Developers almost never “Buy land on speculation”…they have a plan in place or get the deal tied up as Joe says and see if the plan will work.
There are so many things to consider in the purchase or raw land that it is almost impossible to do here. Things like…what are the soil conditions? Can you build on it? Is is only good for pasture land? What can you get it zoned to? What would you do with it if you could get it zoned to what you thought was best and tried to sell it to a developer who says you got it zoned to the wrong zoning? Is is to be your dream residence out in the hinterlands?
Suppose you found out you had to zone it into 5 acre single family parcesl. Then you have to figure out what you can do the infastructure for…ie., water, sewere, electric, streets, sidewalks perhaps, etc. then add that to the cost of the land. Now comes the big question of what can you sell it for…if the numbers do not work…you got 30 acres that you cannot make a profit on.
Do you have a developer who might be interested? If so tie it up like Joe said…present it to the developer and let him do the planning.
Land has always been the highest risk and highest reward part of real estate investing. You take a substantial risk with the possibliity of no reward when you get into land…no depreciation, little tax write off…gambling you can zone it and build it out…big big risks…and if you do it correctly big big rewards.
So, figure out what you want to do with it. Find out if what you want to do is feasible and will be financially rewarding. Then you can establish a value.