Regina and Paul had a trucking company. When it came time to retire, they looked at the value of their property, which much to their surprise was worth far more than their business, at $6 million.
This startling revelation certainly made them happy, but they would have expected the business to have more value than their real estate. This scenario plays out time and again — people are often surprised in a good way by the value of their land, while others end up disappointed.
So what affects the value of land? Let’s take a look.
- Zoning, Zoning, Zoning: When someone has a large amount of land they want to sell to a developer, they need to consider zoning. Although location is the number one rule of real estate, zoning isn’t far behind it these days. Just because you see developments popping up around your area doesn’t mean your land can become the next big thing. As an owner, keep track of your municipal zoning map and zoning ordinance — these two things decide what can and can’t be done with your property. If you receive notice of a zoning change on your land, be very aware of what it means for your property’s value, and speak up at township meetings to influence the result.
- Supply and Demand: If you’re in a growing area with one of the few remaining parcels of raw land, you could have a gem on your hands for builders and developers. Pennsylvania is unique in that it’s losing residents in rural areas but heavily gaining residents in dense suburban and metro areas, mainly due to job opportunities. Owning land on the outskirts of a city or in a popular suburban area where land is becoming hard to find can put you in a great position if you ever want to sell.
- Quality of Land: To see the true value of your land, you need to dig deeper. Numbers don’t lie, but you can’t simply compare square footage and the average price per acre in your area. Dense forest on the side of a mountain isn’t going to be worth as much to a developer as a flat field next to a main road. Ask yourself: how hard would it be to build on this land, and how hard would it be to tap into public utilities like sewer and water? The easier this is, the more valuable your land is.
- Growth: Say you have a piece of land that’s good for building and has the proper zoning — but what’s going on in your area? Is the job market good? Is the population growing or shrinking? What are the major industries for employment nearby? How close is your property to interstates and highways, and what’s the traffic count? Just like your retirement funds, you wouldn’t want to invest in something that isn’t going to grow — a good land owner is constantly studying growth in their area and how it affects their land’s value.
- Planning a Development: If your land has the right zoning and characteristics to become a development, consider securing concept plans from a qualified civil engineer who can show the potential your property has. Securing full development approval can take years and six figures, so a land owner may want to start with a concept plan to understand the potential, then partner with an established developer to take it the rest of the way.
While Regina and Paul are happily enjoying their time at the casino and the beach, you can take these principles and invest with knowledge so you can see a significant return as well.
Buy land — they aren’t making any more of it. Contact us to dig deeper into the value of your land.
