There are many factors that will influence and affect land values and these factors may fluctuate from time to time. For anyone thinking of investing in land, it is very important that you know what these factors are and how they can affect the value of the land. You will have an idea of what the current value of the land is and what the potential future value is likely to be.
The key word here is the future and someone who is able to speculate well on what land prices will be in the future will always be on the winning side. Here are 6 things that affect land value:
Shortage
The basic principles here remain the same, that something that is tradable and available in abundance is of less value than something that is available in lesser volume. This factor is very significant and for example we can see that the prices in the best locations in any city, town or any region are always higher than the prices in the suburbs. This is because prime locations have far more facilities and services available and therefore many people want to move there and set up their business or buy a home there. This increases demand where prices in the suburbs and suburbs are low because land is scarce in the cities and opportunities are less and the lifestyle is also not as good as in the cities. Here, if you can buy a piece of land that is in short supply at a reasonable price, you will be able to make a profit to sell it later at a higher price.
arability
There are many areas of land that are very fertile and arable. Places that are fertile and cultivable are valued much more than non-fertile areas. If you buy fertile land, you can easily sell it in the future, as arable land is always in demand, especially for farming. Due to this great demand for arable land, the price that can be had is usually good.
zoning problems
There are local authorities that will put certain restrictions on the type of development that can be done on the land. Certain areas are zoned for certain types of development and services. Every owner of a land must request permission from the authorities to carry out any type of development on any land. Permission is granted or denied based on zoning laws and other considerations, all of which will affect the price of the land.
Developing
The value of land is also greatly affected by the type of development that takes place on it. If a very successful business is built on it, you can include it in the total value of the land. You can also choose to sell the business and retain ownership. This can help you make profit from two sources. The profit therefore comes from the sale of the business for a good profit and also a regular fixed income from the use of the land by the new owner of the business.
Taxes
The value of the land also depends largely on the area in which it is located and the taxes attached to it. If the land tax is considerably high, then it could be a good reason for the potential buyer to make another decision. Different states have different tax rates attached to land, and depending on the type of land, there may be a different tax attached. Also the size of the land will affect the amount of taxes paid. Thus, the larger the land, the more taxes will be paid and vice versa. Additionally, the land to be invested in may have back taxes that must be paid before any transfer of title can occur.
Security
The security of the area in which the land is located is an important factor in determining the value of the land. If the area is riddled with crime, the value will be lower. The safer the area in which the land is located, the more likely it is that investing in land will produce positive long-term returns.
When making an investment in land, these factors that affect the value of the land must be seriously considered and steps must be taken to reduce or eliminate their effects.