Before investing in land, ask yourself these general questions: Do you think the people who decide to purchase land today will benefit in the future? What effect will population growth have on real estate values? Do you think property values in a local area will go up or down?
The value of land and its future appreciation is dependent on certain characteristics. You can rate the investment value of any parcel by answering the following specific questions.
1. Is it near an existing metropolitan area? The new growth area MUST be within a 60-mile radius of an existing large metropolitan area or not more than 30-40 miles from a small to medium sized city. There needs to be a population base from which to draw the new residents and most people like to be within a reasonable distance of major governmental, medical, cultural, educational, commercial, and entertainment facilities.
2. Is it accessible by a good high capacity highway? If it weren't for highways and expressways there would be a limit to how far growth could spread out into new areas. New cities have historically developed along transportation corridors. Before the automobile this function was served by railroads. Before railroads rivers and canals were the major transportation routes. When the Interstate Highway System was built many new suburban areas became accessible from the central cities. Every time an existing highway is extended or a new highway is opened up into a formerly unserved area, growth follows. If the new area you're considering doesn't have completed highways and more in the planning, you shouldn't consider a land purchase in that area unless you are interested in a very long term investment.
3. Is it flat, buildable land? Level land usually develops first. Study the history of any metropolitan area and you will see that almost always the growth has taken place on the flat usable land first. Then look at aerial photographs to see how the path of growth usually follows the flattest buildable land. It is only when land values have risen high enough to justify the added expense that sloping land in the vicinity of level land will be developed.
4. Is drinking water available? Water is absolutely crucial to the future growth of any new area. If there's only enough water for a specific number of people, you're not going to have over that population living there. Existing cities had to solve their water problems before they could grow to support their existing population. Any new area must already have the water supply in place, or you shouldn't even consider a land purchase in that area.
5. Is wastewater treatment available? Along with water supply is wastewater collection and treatment. This is necessary to avoid ground and drinking water pollution. An area won't grow very much if it depends on septic tanks for sewage treatment. Growth will only occur in areas already served or planned to be soon served by a district or regional wastewater treatment and disposal system. If there are no plans for one, don't invest in that area.
6. Is there a master plan for local infrastructure? Your research should involve getting information from state, county, and city agencies so you know what's on their drawing boards for new schools, new roads, new streets, new parks, new police and fire stations, etc. After a good highway opens up the area, the local government should expect growth to follow and make plans for it. Find out about their existing budgets and future budgets. If they're spending significant money now, it's a fair expectation they are preparing for a population increase. If this is not taking place, the area is not ready yet.
7. Are there utilities available and plans for expansion? Look for evidence of Electric Power companies, Natural Gas companies, Telephone systems, Cable Television providers, and new technology "Green" energy companies. Nobody moves into new areas without electricity, telephone, gas, and cable television. Check with the large utility companies to find out if they are presently in this new area and if they have projections for major expenditures in the near future. These companies have to do a great deal of forecasting and budgeting before spending large amounts for development in an area. This tells you if they are expecting an increase in population, how much, and how soon. If utilities are not present or utility company budgets are small, that area won't be good for your investment.
8. Are there existing or planned commercial and residential developments? Supply and demand will determine how an area grows. Developers won't come into a new area and start building homes and shopping centers unless their research tells them the demand is there. If they're already building in this new area, it's because they know there is a demand for their residential and commercial products and they believe they will make money. Sometimes it is their activity that creates demand by creating jobs, which attract more people and the need for more projects. You should check with local government building and planning departments to find out about new developments and building permits issued in the area. If there isn't much activity planned, that area isn't ready yet.
9. Are there existing or planned industrial facilities? This can be the most important question. Industry and economic expansion creates jobs. Jobs create a demand for people. First you have the workers that will build the factories and warehouses. Then you have the employees that are going to work at these business enterprises. These workers will need a place to live, want to shop for food and clothing, buy cars and gasoline, go to houses of worship, and go to school close to home. All of this creates more jobs and brings more people creating more demand. When there isn't any economic growth there isn't a good land investment environment.
10. What are the population projections for the area? All of the above items can be combined together into a population growth projection. You should go to the Federal Government Census Bureau, state growth management departments, and local planning agencies to find out their current figures and future projections. Some areas are estimated to lose population, some are estimated to have very slow growth, and some are projected to grow moderately, and others to grow rapidly. Where will the influx of new residents wind up? There are political, economic, and environmental considerations that will direct growth in specific directions. You should only consider investing in the path of growth.
At Eyemark Realty, we don't have a crystal ball and we can't tell you what the future will bring. We don't make any guarantees, warranties, representations, or claims on the investment merit or profit potential of any property. However, we can assist you with finding land (lots or acreage) suitable for your investment goals by using the above Land Investment Evaluation System.
Mark Cohen
Broker
Eyemark Realty
Gainesville, Florida
www.GainesvilleFloridaHomes.com
www.EyemarkRealty.com