Undeveloped land has a reputation for being hard and expensive to get to industry standards: but should it? Property values have skyrocketed, with more people and companies looking to buy land and less land available than ever before. If you’re considering flipping a property and selling it fully developed, you’re not alone!
Is buying undeveloped land worth it, though? Here’s how to tell.
The Difference Between Developed and Undeveloped Land
Developed land and undeveloped land are very different, simply because of the work that’s gone into them. Developed land has had time and money to create a space where anyone could quickly start a business based on the property. Undeveloped land is a property that has had little to no work completed on it and would require months and money to get it up and to run. For obvious reasons, developed land sells for a lot more money so that people can avoid the work it takes to create it.
Where Is the Land-Based?
The land’s placement can tell you a lot about whether it’s worth developing it or not. If you’re further out from a city, the property will be worthless, but the interest in it will often be less as well. This means you could buy a property for incredibly cheap and then spend six months developing it only to see it hardly increase in value. If this property is for your own business, consider whether the wait and amount you’ll have to spend to start the company are worth it.
Have You Developed Land Before?
Have you, or your business, developed land before? When considering developed vs undeveloped land, many of the thought points are about the financial needs and expenses: but you should also consider whether you can develop land well. Do you have the expertise to develop it yourself, or would you have to hire contractors to complete the work for you? Is your company one that develops land often, or would this be the first time any of you have approached a project like this? Choose carefully before jumping into this if you haven’t done it before.
Is There Interest In the Land Outside of You?
When you’re looking at property, pay attention to the market that the area is in. Is there fierce bidding over land, or do you notice that most of the properties stay on the market for months at a time? The type of market you’re in can affect how much buying undeveloped land can do for you in the long run. For example, if you’re in a sellers’ market, avoid overspending on undeveloped lands, and buy properties you won’t have to spend any more on. In a buyers’ market, you can buy more land, and when you develop it yourself, you’ll see the property value skyrocket.
Will There Be Industrial Growth in the Area?
Do you see other companies moving to your area? For example, many large companies are moving into more rural areas in states like Texas to create new home bases in more tax-friendly states. If you see this happen to your location, you may be tempted to get in on this land before it starts selling for ten times the amount: this is a good idea! If you’re not buying to flip, and you’re simply buying to develop land for your own company, though, ensure that the properties you’re investing in are worth the money and will do well by your company.
How Low Are You Able To Get the Price?
Do the math before you leap on any property. If you see an undeveloped piece of land that you think is inexpensive, look at how much the cost of developing it would be and how long that would take. Is the amount of time and money put into it, plus the time it will take to create it, worth however much you’ll save from buying it while it’s undeveloped? Don’t be stubborn and purchase undeveloped land simply for the idea of building it up from scratch if you know it’s not a good financial decision.
Don’t Sign Up For A Property That’s Too Much Work.
When you’re looking at property for your company, think about it as a purely business-minded decision. What is undeveloped land, if not an investment? Crunch the numbers, admit when the cost is too much, and do what’s right for your business. There’s no option that’s correct 100% of the time: but every decision you make for your company should be one you’re completely sure of.