Factors that determine the value of Land

One of the first items to consider is the type of zoning.  Understanding if the property is zoned for industrial, retail, general business use, high/low density residential, or if a combination of several blended together will often shape the “highest and best use” for a piece of land. In some cases, a specific use or residential density requirement might require a buyer to ask the seller to go through a rezoning.  As a seller, you want to understand the potential pitfalls of a rezoning and try and mitigate any of those risks.    

One of the most common questions I receive from landowners in real estate is, “What is the value of my land?”  This might seem like a simple question to answer, but in reality, land valuation can be challenging because it is based on a combination of different factors.  There is not a magic formula for the value of land but rather several items that come together to help back into a price.  In this article, I will go through some of the factors that alter the price of land.

Once the zoning is established, one of the next important factors to determine value is the access to utilities.  Is the water and sewer on site or are they 1/2 mile up the road?  Does the sewer/water have capacity?  Does the sewer flow downhill or is a pump station required?  Especially for larger residential developments, sewer can drive up or down the price of land dramatically.

Another item that has always been important for establishing real estate value comes from the old mantra, “location, location, location”.  Real estate is unique because no two properties are exactly the same.  Some important factors to consider could be: what are the adjacent uses?  What are the surrounding demographics?  What are the surrounding area neighborhood home values?  What is the closest access to a major interstate?  Are there any pending subdivisions or major commercial developments?  Answering these questions will help narrow the value even more.   

Once the fundamental external conditions have been analyzed, then it is equally important to study the physical site conditions.  Is the parcel an irregular shape?  Are there existing curbs cut for access or turning lanes?  Does the property have any special features like high visibility?   What is the overall topography of the land?  Does the property have floodplains, wetlands, or buffers?  Subsoil conditions, does it appear to have a lot of rocks on site?  Are there any easements, restrictions, or encumbrances?

As you can see, there are multiple factors that determine the value of land.  One of the most effective ways to determine the value of your land is to reach out to a qualified commercial real estate broker.  Real estate brokers have experience dealing with valuing land consistently and can help offer some valuable insight.  Your broker can study those questions in more depth and compile a comprehensive understanding of your property and what you can do with it.  The better you understand your property, the easier it will become to value what it is worth.  

Interested in finding out more about your property?  Reach out to a Ryan Kinney at New Branch Real Estate today to discuss your property in more detail.