Commercial Real Estate
Land of opportunity
How a land broker can help optimize your real estate investments
By Chelan David
Smart Business St. Louis | September 2008
Hassan Jadali
Principal
Colliers Turley
Martin Tucker
Tiffany Wiegers
Senior associate
Colliers Turley
Martin Tucker
The current environment is favorable
for those looking to buy land. In
order to get the most bang for your buck, however, it is important to get a
quality land broker early in the process,
according to Hassan Jadali, CCIM, SIOR,
principal, vice president, and Tiffany
Wiegers, senior associate, both of
Colliers Turley Martin Tucker.
In addition to helping you navigate the
complexities involved with purchasing a
piece of property, an experienced land
broker can also provide guidance in determining the most opportune time to buy.
“Your profit is made when you purchase a piece of land, not when you sell
it,” Jadali says. “You have to buy the right
piece of property, in the right location, at
the right price.”
Smart Business spoke with Jadali and
Wiegers about buying land for investment purposes, the importance of working with an experienced land broker and
how to reduce expenses during the holding period.
Why is land a good real estate investment in
the current economic climate?
Under the current market conditions
there are not many people buying land.
There are, however, land owners holding
on to the land they have to sell. This
allows for stronger negotiations with the
seller. Also, prices are down in some
areas up to 30 percent from three years
ago. For an investor with cash on hand
now is the time to purchase land.
What considerations should be taken into
account when buying land for investment
purposes?
Land has a cycle like any other business. Investors must make sure they are
not buying at the top of the cycle.
Investors must also consider the impact
of time and costs associated with zoning
and government approvals. For example,
an investor might get an unbelievable
deal on a property at a premium location and then realize utilities aren’t available
at the site, substantial grading is required
and/or property needs to be re-zoned.
When you add all of these factors up, the
costs that an investor puts into the property start to accumulate.
Determining the holding period up
front is a key factor as well. Many purchase a piece of property thinking it’s in
a good location, but do not plan how long
they are going to hold it and what it will
take to hold it.
For example, an investor plans to hold
a tract of land for five years, after four
years they meet with the government
agency to get specific zoning and the
process takes an additional three years.
Suddenly the holding period is significantly increased, which takes money out
of the investor’s pocket.
What strategies are there to locate the best
land available?
One must understand the governmental
process and be patient. The majority of
the time governmental approvals are
necessary, whether it is a zoning issue, a
conditional use permit or both. The average time for a land deal to close is nine
months due to the contingencies and due
diligence with a land sale. It is not like a
building inspection where one can take
occupancy upon receipt of approvals.
Because there are so many processes
involved with land, it is important to hire
an experienced broker with extensive
knowledge in land acquisitions and dispositions. What people don’t realize is
that it takes time and expertise to face
and overcome the challenges associated
with purchasing or selling a parcel of
land. A broker who does not specialize in
land may not be aware of all the potential
obstacles. It will save time and money in
the long run if a broker with land experience is hired over a broker without land
expertise.
How can a land expert aid in the process of
searching for and buying land?
Brokers specializing in land have market knowledge and relationships with
land owners, appraisers and municipal
leaders. A good land broker will research
any future plans or improvements such
as highways or road construction that
might impact the property. These factors
can add or take away value from the
property.
How can one reduce expenses during the
holding period?
First, try to find a temporary use for the
site. For example, if you have an industrial site, perhaps you can rent the property to a trucking company to park its
trucks or to an auctioneer to auction
equipment. If the site is located on an
interstate and has good visibility it might
make sense to construct a billboard or
rent it for temporary signage. Consider
farming the land. Large pieces of property that are zoned commercial will be
assessed with very high taxes; by farming
the property taxes may be significantly
reduced.
HASSAN JADALI, CCIM, SIOR, principal, vice president, and TIFFANY WIEGERS, senior associate, are both of Colliers Turley Martin
Tucker. Reach Jadali at (314) 746-0370 or hjadali@ctmt.com. Reach Wiegers at (314) 236-5471 or twiegers@ctmt.com.
