This illustration shows an oversupply of homes for sale in a market since the absorption rate is only 3 homes per month. We will also have an over supply of finished lots and investors will be assessing distressed subdivisions as an investment strategy. However, there will still be an excess of lots available for housing production in the near future - at least in most markets.
What about vacant land as an investment?
Land prices have come down but not to the level of home prices. Raw land remains an excellent investment with the proper analysis. Remember, the successful real estate developer or investor makes a majority of their profit on the land. If you are considering land to buy or sell, the potential of a positive transaction is enhanced by assessing land with the following criteria:
1. Location Location Location
2. Priced below the market and evaluate sold property prior to 2001
3. Adequate infrastructure immediate to the property
4. Public water and sewer availability
5. Mixed Use zoning with emphasis on a retail/office/residential vertical integrated use
6. Seller financing and become a partner in the project ("The Future of Land Development")
7. Contingent upon government approvals and permits
8. Smaller infill sites supported by a sustainable community poised for growth
9. Start the investigation now for a 4th quarter 2010 delivery
10. Use a detailed site analysis approach to determine land potential (ask for a detail copy)
Real estate is a risk reward industry. The above criteria does not remove the risk and a business decision matrix but it provides the framework in which compare property for investment purposes.
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