- It is the measure of uncertainty associated with undeveloped land that holds price down. To build anything, you need entitlement approvals, engineering and soils studies, permits and financing. The costs and timeline can be estimated but are ambiguous as well. Start with a maximum build-out of the land and go through the entitlement process yourself. Sell the land with approvals to build and some of the profit associated with the approved use will attach to the land.
Provide Land Use and Soil Report
- The entitlement process in some parts of the country can take years. If you don't want to wait that long, just get your feet wet: do a soils study and have a professional planner or land use attorney prepare a land use analysis that identifies zoning parameters and the approval process, concluding with an opinion on what is likely to be approved on the site. This falls far short of having the entitlements in hand, but will help buyers gauge risk and gain confidence in the investment.
Sell Under Option
- Smart sellers who do not have entitlements often sell under an option. They set a price based on a certain anticipated development and allow the buyer lock the property up with an option while they go through the entitlement process. If the development proposal is approved, the sale goes through at the anticipated price. If it fails, you can negotiate downward or pull it off the market until land prices rise.
Carry Back the Loan
- Even though obtaining a home mortgage has gotten more difficult since the housing recession post-2006, it's a walk in the park compared to getting a loan for raw land. If you are willing to carry back the loan -- that is, you accept a down payment and loan the remainder to the buyer -- more buyers will be qualified to purchase the land.