Any advice investing in raw land?

Question

Considering purchasing some land in TX. Future developments look promising. Any advice about ROI on this idea?

Lee Bell · Answer

Someone back at the start mentions highest and best use of the land.

If this is not the first thing to think about, it should be right up there.

Greg Dickerson · Answer

@Marissa Rodriguez you need to be careful when purchasing land for future development. You want to make sure the property has access, utilities and zoning for future development.

Zoning is an important consideration. You want to make sure the property is zoned for the use you intend. You should also determine whether the community surrounding the land will be in favor of development.

I never take down land prior to getting entitlements in place to develop the property to its highest and best use.

I  would not recommend purchasing any raw land unless it is really cheap or you can pay cash or finance without any pressure.

Mark Creason · Answer

@Marissa Rodriguez

I live in Prosper.  Just north of Frisco.  With holding land, you should look into an ag exemption.  Can keep taxes really low until you decide to develop.

Mark

Ronald Rohde · Answer

Unless you're in Houston, no zoning at all

Ronald Rohde · Answer

You get an occasional strip club in a shopping mall, but mostly land values reflect the usage. Residential lots don't get bought by industrial warehouse...

Dave Foster · Answer

@Marissa Rodriguez. Every successful land deal has to have three things - zoning, Density, and services.

Zoning for anything without high enough density and available services isn't worth anything.  I'm putting in a subdivision now in the Central US.  I annexed into the local city.  So I have zoning and the city gave me R2 density so I can get 4 units to the acre.  And because we're annexed into the city I have city streets, city sewer, city water and city bonds to pay for it.

Next door they're having to build one house on three acres in the unincorporated county.  Guess who's land is worth more? :)

But getting zoning and density and annexing is an exercise in engineering and politics even more than it is a real estate exercise.  But it sure is fun once you're past your learning curve.  Don't go it by yourself unless you can afford to buy in cash and wait while you learn.  I've actually had to withdraw proposals for years while the inmates ran the asylum until a newer friendlier administration was voted in.

If it's a great deal hire a land use professional.  Go talk to the nearest city with services in their planning and zoning depts.  Or talk to planning and zoning in whatever municipality it is now.  Most of those counter folks are very helpful.  After that you find the mayor or county commissioners and arm wrestle them!

Chris Blackburn · Answer

Our AG agricultural land is pretty restrictive.  They do allow (Oregon/Marion county specifically) a farm stand use, Ag storage, even tractor sales, nursery, farm.  Water can be an issue- but you would be amazed at what passes for a farm stand- (Full grocery store at one site).  Oregon is pretty restrictive on AG land.  I would be looking at something in the urban growth boundary, otherwise it could be a long wait.

Jay Hinrichs · Answer

its a long play.. can be lucrative though..  I have one I bought in 95  4 acres that took about 22 years to come into the city .. and now its worth a bunch but still has infrastructure issues.   then I have another 117 acres that was zone rural reserve 50 years out.. and this 1 air mile from Intels campus in Oregon 10 billion dollar campus.  then it got voted into urban reserve and the value went up to in the mid 20 million range and at full entitlement it will be 50 million plus..

But then the Thousand Fiends of Oregon got together and appealed at the state level the decision and in a bunch of back room politics what took us 7 years to get move into the urban reserve was taken out in less than 2 weeks..  So we are back to having a value of about 8 million on spec value. and we are spending money lobbying to get our land use changed again through pork barrel legislation other wise My grand kids or great grand kids are going to think i was a pretty cool dude when they cash in 30 to 40 years for 100 million LOL.. But i knew this going into it.. and its only 120k a year to pay on it.. and 100% goes to the purchase price so no interest.. but I dont know if it was the best use of 120 k a year or not.. at the time when in less than 7 years it got moved in and the value jumped.. it was like we are geniuses then we got fubared..

on the 4 acre I only paid 25k for that way back when .. and its on the market for 3 mil.. so we just sit and wait for that right developer to come along.

Dave Foster · Answer

@Ronald Rohde, Wow!  I did not know that!  I had to go see to believe.  Law of use by "Private restrictive Covenants..."?  I can't even imagine what the environment is like.

Jay Hinrichs · Answer

on the 117 acres is a grass seed farm. we get 30k a year from farmer.. its zone EFU so as you know you cant even put one home on it unless you can hit that 80k a year in farm income.. I guess if we went to hemp or some sort of weed thing we could hit that.

I lease optioned it.. that way the seller gets the 120k a year lease fee's are tax free to him and when we cash out he can 1031 and capture the lease income to pay tax..   I just brought 35 acres in in Canby that WAS in the UGB but had to be annexed and now that its no voter annexation it went fine took a few years as we master planned it with a neighboring developer and Hope Villlage .. but we got 89 lots on it so we are working now on final engineering etc.. which is always fun. :)  But we paid basically market for this property we have maybe 3 million in Net equity if we sold lots but building houses jumps that up 3X  so thats the plan take 3 years to build it out.

I remember when i first came to Oregon from N> CA  I bought  great 40 out behind Silverton.. never in my wildest dreams did I figure as long as it perked and i could put a well on it I could build one home.. well nope zoning got us.. and I learned all about EFU Timber zones doing Template tests which are highly complicated if you have ever done one of those in an AF zone.. this is what keeps Oregon from sprawling and why property values generally hold pretty darn well or have gone up.. demand and scarcity.. this is not Texas were you can go out buy 1000 acres and plop 4k houses down LOL.  on that 40 acre its was a timber track we logged it and the logging paid for the dirt.. I was hoping for 100 to 125k profit on that one but ended up selling it as logged over reprod for 1k an acre or 40k so we made 40k and got an education in Oregon land use and zoning.

Any advice investing in raw land?

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