Knowing when to invest in land does not have to be complicated, but it does require you to be educated. Only through proper research can you realize the true investment potential of your property, and this article helps you consider a few things about the land before purchasing it.
What is your total budget?
First, you should seek a professional land appraisal. It is important to know the actual value of the property to make sure you do not overpay for it. A land appraisal can also give you an idea of what the property will be worth after your transaction has closed, and the property is yours. Whether you intend to sell timber or develop your land, you should be aware ahead of time what the return on your investment will be. This guarantees a smart purchase and keeps you from doing poorly from the start. Keeping as much money in your pocket as possible will make you that much more successful and will give you space to buy more properties in the future.
You should also account for the cost of inspections. If you intend to develop any part of the property, then you will need soil tests to determine whether or not the land will support your infrastructure and buildings. If you intend to farm the land, then it needs to support the crops you intend to plant or pastures for livestock. You will also need test wells drilled to provide access to potable water, and you will need to test that water for quality and safety. These inspections can get expensive, especially if you need to test multiple sites on your property, so include them in your budget.
You should also consider the closing costs associated with your purchase. These will include, among others, title company fees, and tax fees. If you are obtaining financing, extra fees can rise in to the thousands quickly and may decrease the amount you can spend on your property. Discuss potential closing costs with your lender before starting your search. This will help you and your land agent commit to a better price point.
What is the best use for this property?
Several factors determine the highest and best use of any land for sale. First, you need to know how the property you are considering is zoned. There are zoning restrictions that could dictate whether or not your land can be used for commercial development or farmland and what the scope of your development can look like. You do not want to buy a large parcel with the intent of creating a livestock farm, only to find out after your sale that you can only use it commercially. Some land may not be zoned for large- scale timber operations.
It is important to review the regulations that govern the parcel you are considering as well as those of land adjacent to you. There may be restrictions imposed that could limit your potential income. Neighboring property owners may submit complaints to your municipality if they can legitimately object to how you are using your land, and this could lead to fines or ceasing of your operations. Understanding the property’s zone regulations can help you avoid these mistakes.
Moreover, property with mountainous terrain, limited timber stands, or a high number of swamps can limit the way you use your property. Having a professional by your side to help you review the ground cover and other features of land can help you decide if it is the best choice for your land investment plans.
How long will it take to realize a return?
When buying land for investment purposes, you want to consider how long it will take for your property to earn returns. For timber management, it is advantageous to have a timber portfolio that is varied in age. Buying a young timber stand will add years to the time it takes you to see income from your property. Purchasing property with mature trees ready for harvesting will mean you need to replant in the near future.
For development, the availability of your contractors, supply of materials, and required infrastructure will all cost you time and money. Consider these costs so you know when your investment will produce results.
For more information
Do not miss this opportunity to buy land in Arkansas and Texas. If you have more questions about land for sale, contact DDK Forestry & Real Estate at (501) 219-8600 today. Our team will answer your questions about land investing and will help you find the right property to reach your goals.