What is land worth? 5 Important Contributors of Value

Consider these important contributors of value.

I’m a landowner.  And I love having a place that my family and I can enjoy. It’s not only where our home is located, it’s the place where I’ve invested time and money in planting pines and pecan trees.  I enjoy tending the land and preserving it for my children and their future children. And if you ask me what my land is worth, I’ll probably tell you it’s priceless because of what it means to me. But we all know that everything has a value, even my land.

So how do you determine how much your land is actually worth? Let’s consider several important contributors of value.

Does the land have income-producing capability? This could be in terms of immediate income generation, like merchantable timber or a lease for farming or hunting, or that there’s the opportunity to plant trees for future income production or areas that can be developed for farm land. Having the potential for income production from your land is a major contributor to its value.

Of course, everyone knows that location is an important part of any land purchase. And the county the land is located in as well as the surrounding infrastructure plays a role in the location aspect of the property. Then other factors come into play. Is the property easily accessible by a public paved road or is it at the dead end of a long dirt road? Depending on what a buyer is looking for, either of these scenarios could be just what they want. Then once you enter the property, can the entire tract be navigated on an established network of good interior roads? If a buyer is looking for an investment property that they can enjoy on a regular basis, travel time from their home and accessibility can mean a higher price, which equates to a higher land value in their mind. And that holds true for the buyer who wants the isolation and privacy that a dead end road property could offer. Location and the value it brings are really relative to the owner – it’s finding the right buyer that makes the difference when you’re ready to sell.

Along with location is the desirability of what the property has to offer. If you’ve invested in your property and have developed and maintained interior road systems, have added a pond or have installed irrigation systems on your farm land, it adds value to land. Whether you’ve developed your land with hunting and conservation in mind or it’s used completely for crop production, your enhancements should correlate with your primary objectives for the property.

Another contributor to a land’s value are the physical attributes of the property, including timber, soil types and the presence or access to water. Woods and water are two of the most common requests that I hear from people looking for recreational and investment properties.  And the soil type is important whether you are growing trees or crops. Obtaining soil maps from your local USDA office can be beneficial in determining the types of soil that are present and the “best use” plan for each soil type, which in turn, translates into a better measurement of the property’s value. Planting trees and adding ponds are both great investments in your property if neither currently exists.

When looking at timberland, the age of the timber contributes greatly to the land value.  Are there varying ages of trees so that you can harvest and replant in stages as opposed to clear cutting?  Or will you need to clear cut everything at one time? While older trees give you immediate income potential, having a staggered harvest and replanting cycle can be beneficial for cash flowing the property.

Whether you are a landowner or a potential landowner, you want to make the most of your investment. You want to keep in mind that while ownership for several generations may be your goal, sometimes circumstances change or other opportunities present themselves and marketing the property may become a viable option. Think about what would be attractive to the vast majority of potential buyers, not only as you’re buying your property, but as you’re improving it.  Misunderstanding the importance of this is a very common mistake.

And one last thing to keep in mind – whether you’re a seller or a buyer, obtaining an appraisal from a certified real estate appraiser that specializes in the type of property that you’re working with is good decision. Land is a valuable commodity, but what it’s worth – the actual dollar value – is what you really want to know and understand.

Brant Harrell,
Relationship Manager NMLS 700136