Buying land should be simple and easy. After all, it’s just a piece of dirt. Right? Well, not so fast…
Contrary to what common sense would dictate, investing in a piece of land to develop actually is usually more complex than buying a property that has already been developed. One would think that all you really need to know are the size of the building you want to build and if that building will fit on the land you want to buy. However, there are numerous other factors to consider before buying land for your development.
Understanding what the current zoning and future land use will allow on a specific property is absolutely crucial. Certainly you don’t want to invest in buying land with the intention of building a manufacturing facility that requires an industrial zoning when that property is currently zoned for or has a future land use as a residential tract. It is paramount that you and your advisors have an intimate knowledge and understanding of the current and future land uses of the land in which you’re investing.
Every building in the 21st century needs utilities – electric, water/sewer, and phone/internet connections. These utilities are usually either provided by a public utility company or by very large corporations such as AT&T. If any of these utilities are not readily available to the site already, the costs to get them to the site for your building can be very expensive. A knowledgeable civil engineer can quickly study a site to determine the potential needs and costs to make sure that utilities are adequate for your development.
Another hot-button issue of late is the need to capture storm water runoff. Unfortunately, this was an issue that was not given a lot of serious thought for many years and most communities are playing catch up to come up with comprehensive plans to upgrade their storm water infrastructure. Because of this, many of the requirements are in a constant state of flux, but usually they are becoming more intensive. This is another aspect of development where it is crucial to have a knowledgeable civil engineer who can come up with the most effective and cost-controlled solution to capturing the additional runoff that your development will generate.
When you develop a building, it obviously has to be structurally sound. The condition of the property’s soil and topography can greatly affect the cost to ensure that your structure meets all needed requirements to build. Not all dirt is created equal! Before you purchase your property, it is highly recommended that you have engineers perform a geotechnical analysis of the land. This analysis involves testing of the physical properties of the soil and rock on the site. Once this is better understood, the engineers, architects, and contractors can accurately know the type of foundation that is needed to provide for a safe structure and also the costs that will be entailed.
Nothing can put a halt to a development quite like the discovery of environmental contamination on a property. Before buying land, it is imperative that an environmental assessment be completed to ensure that the property is clean. The most common of these assessments is a Phase I Environmental Site Assessment. The Phase I assessment involves a review of records, a site inspection, and interviews with owners, occupants, neighbors and local government officials to determine if there is reason to believe that the site may be contaminated. This contamination can come not only from a previous use of the subject property, but also from a neighboring or nearby property. If any red flags are brought up during the Phase I, it is recommended that a Phase II assessment be made on the property before purchasing. This Phase II goes into much greater detail and depending on the circumstances of the specific property may entail soils samples, groundwater samples, and testing of any underground storage tanks. Once the results of the Phase II are returned a determination is made on whether or not the property is contaminated.
As you can see, there are many potential pitfalls when investing in a piece of land. However, most of these can be avoided. This is where a knowledgeable and experienced team of advisors, including brokers, engineers, architects, contractors, and attorneys, will be vital to ensuring that you are able to reach your development goals when making your land purchase. If you find this information informative, please click the tweet button below!
About Chris Palmer – Chris has been working with commercial real estate in Pensacola, Florida since 2010. He primary specializes in working with commercial real estate clients on development and investment related properties. Click here to read his full bio, or if you would like to contact him, you can call him at 850-434-7500 or email him at [email protected]