Factors to consider when buying commercial land

As simple as it may sound, buying commercial land is not a very easy decision for real estate investors. All investments have their twists and turns, and in real estate, the buying option is of utmost importance.

The prevailing global economic challenges ranging from high inflation, high-interest rates, and the uncertainty of other investment opportunities, including shares and bonds, are opening more doors for real estate opportunities to invest.

Franklin Roosevelt, the 32nd US President, and a lawyer said, “real estate purchased with common sense, paid for in full, and managed with reasonable care, is about the safest investment in the world.

So, what is the idea of commercial real estate? It is the idea of buying real estate properties and assets that generate money over time.

Is it possible to buy commercial land or property without generating profit over a stipulated time? To get a good Return on Investment from buying commercial land and other real estate assets, certain factors must be considered.

In this article, we have compiled the 7 key things to look out for when buying lands for commercial real estate. But first, let’s define what commercial real estate is.

What is a Commercial Real Estate?

Commercial Real Estate (CRE) is a term used to describe a broad class of real estate assets, purchased with the intent to earn a profit either through rental income, capital gain, or both.

Types of Commercial Real Estate

A given property with a specific nature of use is called a type of commercial real estate. There are four major types of commercial real estate. 

The various types of commercial real estate are:

  • Multifamily rentals
  • Office space
  • Industrial
  • Retail

For purpose of this article, we will discuss land as a type of commercial real estate. All commercial real estate assets come with land. But when the land is vacant with nothing in it, it can be grouped into three types.

Greenfield or Agricultural Land

This type of land is dedicated to agricultural purposes. It is often inexpensive and it is found majorly in rural areas.

Infill land

Infill land is located in the urban area of cities. It is a vacant land that has its surroundings developed. It also refers to the use of land within a built-up area for further construction. Examples are military bases and parking lots.

Brownfield

Brownfield land is vacant land that has become environmentally impaired with the passage of time and use. The land may be available for a very affordable price because of the cost involved in redeeming the environmental damages.

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Benefits of Land Ownership 

According to John D. Rockefeller, “The major fortunes in America have been made in land.” It means that buying commercial land is a veritable tool for getting a good Return on Investment (ROI).

The land encompasses all physical components, endowed by nature, to a piece of property – the natural resources, climate, fields, environment, fields, forests, and sources of water.

Land ordinarily is a valuable resource, but if it comes with other mineral resources, like precious stones, oil, and gas, it automatically increases its value.

Buying commercial land has a lot of benefits if the source is reliable. There are rural properties available across the United States with an average low cost. The ROI on these properties increases if purchased wisely. It is also an easy choice for investors who demand long-term investment returns.

Although land’s ROI capacity is often underestimated, it has high potential value compared to other investment options.

Real estate trends reveal land will continue to appreciate over time as a result of its tangibility, usability, and scarcity.

The following are the benefits of land ownership:

  • It requires little or no maintenance/repair fees
  • There is little or no risk involved
  • It is an affordable investment with long-term benefits
  • It has multifaceted use and flexibility
  • Buy and hold strategy of land to sell or lease generates income for the owner
  • Minimum property tax is involved 

What Are the Factors to Consider When Buying a Commercial Land? 

Buying commercial land isn’t something you should jump into at first sight. The right process for land acquisition should involve careful research, planning, and reviews to ensure you are getting the perfect parcel to meet your needs.

Here are the 7 key things to consider when buying commercial land.

1. Zoning

The issue of zoning is the number one consideration when buying commercial land. Zoning allows local and national authorities to regulate and control land and property markets to ensure complementary uses. 

Meanwhile, the knowledge of the zoning ordinance in an environment can greatly affect the future of that land. Zoning also includes the size and height of buildings, waste management, noise level, etc. 

2. Accessibility

Location matters when you want to purchase commercial land anywhere in the United States. Accessibility offers a wider choice as it may include the location factor. Commercial land that is easily accessible will have a high rental value compared to one that isn’t.

Moreover, is the land very easy to connect to other freeways? How about vehicle ingress and egress? Will a parking lot be obtainable? These are questions you should consider when buying commercial property. 

3. Utilities

The presence of utilities on or around the land will enhance its value for future use. There won’t be occasions of potentially high hidden costs.

When buying commercial property, never assume anything. Be sure about the presence of water, electricity, and phone/ internet services, and drainage management before you make the final purchase decision. 

4. No Restrictions

Avoid buying commercial lands with restrictions. Restrictions are given by previous title owners on the use of land, the type of building to be erected, and property maintenance requirements. When this is the case, the land may not meet your expectations in the future.

5. Check the Market Value of the Commercial Land Before Buying

The price at which the land will command under normal circumstances is of great concern. What’s a business if you are not making a profit from it? Profit is the reward for purchasing commercial land. The value of commercial land should be worth the time you put into developing it. Hence, the fair price that the land would fetch at a particular time should be very well considered.

6. Topography

As an investor, you should seek the help of topographical surveyors. They can give a detailed picture of the land’s makeup in terms of easements, the slope of the land, nearby water sources, floodplains, underground pipes, and even soil quality. 

7. Before Buying Commercial Land Check Your Budget

The cost of the land is another key factor you need to consider. Once you have land that is fitting, the money involved should also fit your budget. You should not be too forward to make payment, instead press on to ensure it fits your budget size, and if not it shouldn’t cause you to break the bank. 

Be sure of your financing terms because buying commercial land is likely to demand a significant amount of capital upfront. If such an amount that suits the land is unavailable, then you need to look into the possible financing options you have. 

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Conclusion

Investing in commercial lands is a reputable business that anyone who has the capital can invest in. The opportunities do not depreciate but only appreciate. All that is required to grow your investment portfolio is a proper understanding of how the business of real estate works.

Tega Daniel
Tega Daniel is an SEO content writer for EntrepreneurBusinessBlog.com

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