Is Land A Good Investment?
April 9, 2018
Some people ask themselves, is land a good investment? And the short answer is it depends. The long answer is based on what your goals are and how much time do you have to work with? There are different types of land in different parts of town and both of those make a difference in what the results are.
I recently worked with a client who bought 9.4 acres of raw land in San Tan Valley in 1983 for under $40,000. For years it didn’t gain much value as there was still a lot of land to build on closer in to the center of the city. But, fast forward a few years and the city begins to stretch to what used to be the country, and now the land has real value.
When it came time to sell, determining the “value” was not an easy task. What things make land valuable? This is what we came up with:
- Proximity to “civilization”
- Level of development, i.e. engineering, grading, pulling utilities, dividing, developing access, etc.
- Paved or dirt access road(s)
- Proximity of available utilities and will it need a well or septic?
- What types of properties surround the parcel in question
Given all of (but not limited to) these things it becomes very tough to compare one piece of land directly to another in “value.” I hunted down every developer that I could find who would know how to turn a raw piece of land into something valuable and when we got an offer it seemed a little low to the sellers. For a moment they considered not selling and would “wait for it to go up to take advantage of the increasing housing market.”
But after some careful thought and consideration, we came to the conclusion that the land was of no value if it was being held by someone who didn’t have the means or know-how to make it “valuable.” If they wanted to take advantage of the market it would be better if they sold it, and reinvested the money into a rental property that will guarantee income on a monthly basis.
In this case, the land was a great investment over the coarse of many years. But, this same seller bought a piece of land in another part of the valley outskirts, and the value on that property hasn’t changed a bit in 15 years due to the lack of the afore mentioned criteria. So, the moral of the story is, if you’re asking yourself, “is land a good investment?” do your homework and find a trusted professional who knows the area where you’re looking to buy or sell.
We’re looking forward to hearing from you soon!