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What determines land value?
4 posts by 4 users
John C.Real Estate InvestorCincinnati, OH 
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What determines land value? Is it simply what one is willing to pay? If a Wal-mart wants to develop on a few raw acres of commercially zoned land, does it make that land a lot more valuable? When a value of a property increases, is it the land that actually increases or is it the bricks of the house that increase in value? Just curious |
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Michael S.Real Estate Investor / BP ModeratorBellefonte, PA 
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Usually what determines land value is location. Commercial is always based on location. If a Wal-Mart, Lowes, Home Depot, Target, etc come into town you can bet that the value of the land is going to go up. The improvements to the property will go up with inflation because the cost of a 2x4 goes up so the cost to build or rebuild the improvement will go up because of this. Now when an area runs out of land that can be developed then the prices of land in that area sky rocket if it's desirable land. (read the coastal areas that created the current market bubble.) If you are in a rural town in the heartland chances are that you can buy a piece of property with a house on it and it's going to be the house that drives up the land at a steady rate keeping pace or slightly out pacing inflation (contractors prices are going up lately because of gas prices). If you buy the same house on the coast chances are it will be worth lots more because of the location of the land it is sitting on. But because of the location the value of the land is very unstable, based on the demand for that location. If you look at the tax records of the property it will usually tell you what the improvement value to land value ratio is. In my county it's 80% improvement and 20% land. In neighboring county that I in thinking about purchasing in the value is 90 to 10. Hope this helps, -Michael |
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Sdp L.Real Estate InvestorLos Angeles, CA
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Alot of things determine land value. Location is among the top. Where the land is near, if there is construction in the surrounding area, big city or rural, etc. It's always good to invest in land on the outskirts of big, growing cities, as the land value is lower than in the city but sooner than later the city will grow to encompass that land. |
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Dustin T.WA 
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I'd say that is typically agreeable, but a little too broad. What doesn't come into play here, is how desirable the location is. In my area, the towns that have the 'big box' chains like home depot, lowes, and wal-mart are actually MORE affordable than some of the small towns which have not allowed those companies to come in. These large commercial business can improve some cities, but can devalue some as well in my opinion. Growing too quickly drives down the home values in a given town. Kind of hard to ask top dollar for your 20 year old home when the developer down the road is asking 20% less for a brand new home because he has 40 new ones he's trying to sell at once. Commercial property I think typically increases in value when other commerce in the area is growing. It's a sign of growing residence and a need for more merchants... whereas residential land in this same type of area may or may not become more valuable. Crime, supply, jobs, etc can all effect the prices. |
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Posted: 06/24/2008 at 10:45AM