Land for Sale
Raw land is unimproved property; it has no utilities, sewers, streets or structures
and usually must be cleared.
Here are (or can be) a few drawbacks that are sometimes associated with raw land:
- Negative cash flow; usually the land does not generate any income while you pay
the principle, interest, taxes and costs of development.
- Tax advantages are scanty as land cannot be depreciated.
- Generally, raw land is considered a long-term ill-liquid investment that often takes
time before gains can be realized.
- Risk of loss on resale can occur if you choose poorly, fail to evaluate and negotiate
properly, the economy slips or various other unforeseen events occur.
- It is difficult to obtain traditional financing on or borrow against accrued equity.
Here are some possible benefits to raw land:
- Land has the potential to experience tremendous appreciation if bought in the way
of growth, or if a higher and better use can be achieved.
- Owner financing can often be obtained through the seller at below-market rates.
- Subdividing can create added value and provide for immediate returns.
- Privacy and pride of ownership can provide a secure feeling to the holder.
What is considered good and bad land?
The worst you can buy is swamp or marshland. Most often flat land is the least expensive
to develop and the most desired for building purposes. Land with barren rock
will increase costs and virtually eliminate a basement just the same as a high water
table.
Note: Loamy soil, which consists of a balanced mixture of clay, sand and some organic
matter, appears rich and dark in color and is considered ideal for most purposes.
As opposed to good soil, you don’t want hard cracking ground when dry and sticky
soil when wet. Warning! Check with your state offices for the presence of expansive
soils; this stuff cracks foundations in the most insidious ways, leading many to
ruin.
Many people are literally being driven to the hills. Granted the views can be spectacular
but roads, utilities, water, sewer, and foundations, such as pilings, can add 25-30%
to building costs alone, further adding to this already expensive proposition. When
considering going vertical, an 8-degree slope is about the limit when concerning
building economically on hillsides.
Plots with trees, a view, rectangular in shape, a gentle slope or none and a good
location are most often preferred, and streams can boost values by 100% in some
cases.
How to determine the value of raw land
Using the appraisers standard view of estimating value can give us some clues, so
let’s look at what appraisers do!
- Site size and shape, represented by frontage, width and depth.
- Corner influence equals visibility for commercial, or privacy for residential.
- Plottage, has assembly or combining of parcels been accomplished.
- How much land is excess or surplus; surplus has less value than what is required.
- Topography: Land’s contour, grading, natural drainage, soil, view and usefulness
- Utilities: Sewers, drinking water, natural gas, electric, telephone, cable, etc.
- Site improvements: Landscaping, fences, gutters, walks, drives and irrigation
- Accessibility: Parking, location, streets, alleys, connecting roads and highways
- Environment: Climate, adequate water supply, air quality, streams, rivers, lakes,
oceans and the absence of any hazardous materials