Finding property to develop can be difficult. To complicate this even further, it's even more difficult to find a piece of property large enough to develop into an entire residential community. It's easy to want to jump and purchase the property immediately when you finally find it, but there are some negatives that you need to be aware of. These ten negatives can impact and impede and even destroy the development and eventual sale of your property.
#1) It's extremely important that you have the soil tested when you are considering the property. There are all kinds of things that have one way or another made their way into the soil that would kill your deal before you'd ever made it. Land that has previously been used by industry could be land that has waste in it like oil, lead, or toxic waste. These kinds of things make the land not able to be developed. If you purchase land that ends up not able to be developed you will be stuck with the property. That means that you'll be paying taxes on said property and not be able to do anything with it.
You may be able to clean up the land, but that will take additional investment and you additional time before the land will be able to be developed. If you already own the property and find that it does have these problems you may be able to hire someone to clean up the land by bringing in fresh dirt after turning over the polluted earth and taking it away. Again, this will probably be a long, arduous process which means that the land will not be able to begin the long development process before it is entirely cleaned up and completely free of all problems.
#2) If you are close to an area that has bad smells in the surrounding air you may have a problem selling your lots once the land has been developed. For example, a community was developed just outside of a landfill and that community took quite a long time to come up. Not many want to live in an area that will smell bad with each warm day when they go outside. This will make the land harder to sell and develop which may end up in the developer losing money in the long run.
#3) Another area that you would want to stay away from as a developer would be one that is near a loud location. An airport would be a good example. When planes come and go they are quite loud. If a residential neighborhood is developed too close to this, it will be hard to sell the lots and get people to live so close to such noise.
#4) Sites that have health hazards too close to them can be hard to determine but they can also be sites that will lose money for the developer as people will be concerned living so close to these hazardous things. Some examples are areas that are close to high power lines, a car manufacturing plant, or other plants that will emit toxic wastes. Not many would want their children exposed to such dangers and therefore would not want to purchase a lot in this area.
#5) If the land that you're considering investing in is near or would provide a view of something sinister like a cemetery or something unpleasant and loud such as a string of bars, casinos, or a prison, use this reason to decide against the investment. Not many would want to look out onto a cemetery from their kitchen window. Those raising families traditionally would not like the noise and danger from things like bars, casinos, or a nearby prison.
#6) Land that may be considered unincorporated may be difficult to sell to consumers. This means that the properties will have well water instead of city water. Some will be willing to buy bottled water and still live in this area, but many will not. Another negative about this type of area is the fact that the people that purchase the lots will have to use septic tanks rather than city utilities. Again, many people will not want the extra hassle of dealing with septic tanks that have to be maintained and often clog.
#7) When you take a look at the land you're considering for development be sure to see if it there are any wetlands within your acreage. Wetlands are extremely difficult to build on, if they can be built on at all. With wetlands your only hope for development would be to fill those lands in with earth that can absorb the water. In many cases these wetlands are protected by the government and will not be build able anyway.
#8) Certain soils are also hard to develop on as well. Rocky soils and soils that are not compatible with septic systems will not be able to be developed. This will again result in either additional money having to be spent to make the land able to be developed or additional taxes.
#9) Be sure to pay attention to local politics. If there are any political people that are not for development they could make your project difficult to do. If you have those kinds of problems you may never be able to develop the land.
#10) Be aware of any other local development. Other local development may make your development more difficult to sell. People that are looking to purchase property to build a home may not like other development that is coming up and this will make your properties harder to sell. Be sure you know all other nearby developments and how the community feels about them.
Developing land into a residential community can be a very profitable venture, but you have to be careful with your investment. As long as you are aware of the ten above negatives and are careful to avoid them, you are on your way to selecting a great development site.
About the Author
Tony Seruga, Yolanda Seruga and Yolanda Bishop of Maverick Real Estate Investments, Inc. work with builders, developers and other players in the commercial real estate industry to acquire and develop properties. They use progressive investment strategies that have proved extremely profitable. In addition to their own deals, they teach both seasoned and inexperienced investors how to be big players in the game. Visit the website for more info.
