Estimated Land Value: What It Is and Tips to Improve It
The Land Up Learning Series
If you’re applying for a land loan, planning on selling your property, or you’re just land-obsessed like we are, this blog is for you!
There are a lot of numbers in real estate. For current or future land owners, an important number to know is the estimated land value - which plays a big role in determining the overall “worth” - or fair market value - of a piece of land.
In this blog, we’ll walk through what exactly an estimated land value is, how it’s calculated, and how to improve your land’s value.
What is Estimated Land Value?
In a nutshell, a property’s estimated land value is how much the land is worth - or the “fair market value” - as determined by an appraiser or government agency. This number helps determine the price that a typical buyer would pay, as well as a typical seller would expect in the current market.
To come up with your land’s estimated value, several factors are taken into consideration such as the location, size, zoning, topography, current conditions, and accessibility.
Why is Estimated Land Value Important?
Now that we know what an estimated land value is, it’s important to understand where it’s used. Once your land has been assessed, this number will help determine:
The fair market value of the land, which will be a solid basis for the purchase price
Property taxes, which are calculated based on the land’s value
Insurance coverage needed for the property
At Land Up, we help you determine the most competitive price for your property to get is sold fast and for top dollar.
How is Estimated Land Value Calculated?
So now we know the what and where, now let’s dive into how it’s calculated. Your estimated land value is determined by an appraiser or local government agency. Since properties can serve a variety of purposes, they have several different methods to determine the estimated land value:
Sales comparison: Often referred to as “comps”, the land is compared to similar, recently-sold properties in are, while taking into account important differences and factors like location, size, zoning, etc.
Income: If your land is used for any sort of business-purpose - such as growing crops, raising and selling livestock, or renting - the estimated land value will be determined by the income that the land generates, plus any applied capitalization rates.
Cost: Similar to getting comps, this approach takes into account how much it would cost to replace your land with a similar property - taking into account things like the cost of the land, improvements, etc.
Based on these calculations methods, it helps give land owners an idea on actions they can take to improve their estimated land value. We dive into this topic more in our previous blog, and some quick tips include:
Maintenance: keeping the land clean and cleared to improve its visual appeal, as well as taking steps to protect against environmental damage.
Improvements: adding fencing, buildings, amenities, and more can enhance the aesthetics and the functionality of the property.
Developments: if your local laws allow it, developing the property for commercial or residential use - like adding office space, subdividing for multiple lots, or adding roads or utilities.
Comparisons: while you don’t need to keep up with the Joneses, it’s good to have an understanding of the estimated land value of your neighbors, especially if their property has similar features and characteristics as your own.
TBD Fischer Store Road in Wimberley, Texas, offers unique features like a long private driveway surrounded by mature oak trees.
Wrapping Up
While rarely anything is just the sum of its parts, calculating an estimated land value is almost exactly that. It comes down to the sum of a variety of factors which can add or subtract from the total worth, and isn’t typically based on a single element of the property. The appraisal may start with sales comps, income approach, or a cost evaluation, but other factors may come into play to determine the true value of the property based on current market factors.
Get a Free Market Analysis of Your Property
So all of that information☝️ was cool and all, but where might your estimated value fall? If you’re curious what a competitive price may be for your property, get in touch!
Our Land Specialists are experts in the area and have helped clients buy and sell land across Central Texas. With their abundant first-hand experience, a Land Up Realtor can help you understand how best to determine a competitive price for your property, as well as ensure you are getting the top dollar for your investment. Contact us today to learn more!