Take 5
Best Practices in Valuing Land
With Tony Veldkamp
TRT: 3m 41s
Video Transcription

Tony Veldkamp directly addresses camera:   Unlike valuing a home in a residential subdivision where comparable properties are often similar in size and location. Commercial land valuation requires a thorough analysis of numerous variables. Depending on your inclination and expertise, this complexity can either be a compelling challenge or a reason to steer clear. Hi, I'm Tony Veldkamp, CCIM. I am senior advisor with SVN Commercial Advisory Group in Sarasota. With over 33 years in commercial real estate with a strong emphasis on land, I've experienced these complexities firsthand.

If you want to transition to commercial real estate or broaden your knowledge, let's take five minutes to talk about best practices and evaluation process. The first step in valuing land is determining its highest and best use. This involves analyzing the land's location, size, layout, and roadway access. For instance, is the land best suited for a residential subdivision, an apartment complex, or a commercial retail center.

This analysis is crucial because it influences the type of interest the property will generate in the market and its value. Zoning laws and the potential for rezoning play a significant role in land valuation. Each piece of land has a current zoning classification, but its future potential can often be more valuable. For example, land currently zoned for agriculture may have a future land use designation that allows for higher density residential development.

Understanding local comprehensive land use plans, which have been in place since the mid 1980s, can provide insights into what a property could potentially be re-zoned for. Just like in residential real estate, comparing similar properties is essential. However, for land, you need to compare based on its potential use. For example, suppose a nearby parcel sold for $500,000 and was intended for a residential development of 50 homes.

In that case, it sets a per unit price of $10,000. That can guide your valuation of other properties. Always ensure that the comparables are recent and reflect current market conditions to avoid over or underestimating the value. However, you also must recognize future trends in the area and how they are evolving. As you know, the real estate market is dynamic and trends can shift rapidly.

Post-Covid, we've seen a significant shift in the demand for land previously zoned for commercial retail being repurposed for multifamily apartments due to increased demand.

Keeping abreast of these trends by regularly communicating with developers and staying informed about local market conditions is crucial for accurate land valuation.

Remember to review updated market data regularly. A property priced based on data from two years ago may not reflect its current market value.

Land often takes a long time to sell, and market conditions can change significantly during a period that the land was under contract. It's also essential to understand the shifts in development trends. For instance, that land initially approved for commercial retail use might now be more valuable for residential use due to the changing market conditions. Failing to adapt to these trends can lead to missed opportunities.

Pursuing an accredited Land Consultant designation, an ALC can be beneficial. Networking with land brokers and staying engaged with the development community are excellent ways to stay updated and refine your land valuation skills. Valuing land requires a specialized skill set and a deep understanding of various factors, including zoning, market trends, and highest and best use analysis. Mastering these concepts is essential for residential agents looking to expand their expertise or transition into commercial real estate.

Continuous learning and staying informed about market conditions will enable you to make informed decisions and provide valuable insights to your clients.