Determining Land Value.....

[TexasBred]

Jo the income approach to value is seldom used on land anymore unless it's come kind of high concentation feedlot operation. Otherwise "market value" is normally used for appraising the propety and attempting to arrive at a value. And many times "idiots" buying overpriced land dictate the value as they themselves have now created a "new market" with their purchases albeit inflated. The taxing agencies love it.

 

[Jogeephus]

The taxing agencies love it.

You are soooo right about that. But it is the only way to truly value the land for personal purchase unless you intend to throw in some subjective things like the possibility of it appreciating in value - which I think is what got the banks in the mess they are currently in with the home loan crisis. After all, you can't put restricted neighborhoods on everything.

 

[grannysoo]

Simplest way to determine the land value is to divide the annual net income you can make from the property by an interest rate. For instance, if you can net $80 per acre each year then divide this by 6% - this will yield a land value of $1333/acre. Essentially, this tells you you can make the land pay for itself with your venture if you can maintain this net return. However, people don't look at it this way anymore and the fair price is more likely determined by what some fool is willing to bid at auction + 10% buyers premium + survey fees + legal. Never thought I'd see people paying $3500/acre for swampland - but some people do.

Seems the simple way around here is to see how many acres are available, divide that by the number of houses that you can place on them, the cost of a highway in the subdivision, and sell off all of the farmland you can find for housing developements. That's what's happening around here.

And talk about swampland.... some of these places they build? I'm still laughing. They are dry today, but wait until it gets wet. They will be able to drag for crawdads in their front yards.

 

[dyates]

Seems the simple way around here is to see how many acres are available, divide that by the number of houses that you can place on them, the cost of a highway in the subdivision, and sell off all of the farmland you can find for housing developements. That's what's happening around here.

And talk about swampland.... some of these places they build? I'm still laughing. They are dry today, but wait until it gets wet. They will be able to drag for crawdads in their front yards.[/quote]

Amen to that. You can't buy a rockpile here for less than $3500/acre. Five acre tracts that are 10 miles from town just sold last year for $50,000 each, bare land. I don't know how these people intend to maintain some of these 25-30% slopes on their driveways. I'd be afraid my kid would end up in the middle of the highway if she fell down.

 

[TexasBred]

Land is like fine whiskey. It ain't never brought what it's worth. :drink: :secret:

 

[simangus23]

ASK IF YOU CAN TAKE A SOIL SAMPLE AS A POTENTIAL BUYER THEN BASE THE PRICE ON THE LACK OF MAINTENANCE. SEEN THIS BEFORE -- A PIECE OF LAND NO ONE TAKES CARE OF THEN WANTS A MINT FOR IT ---

 

[TexasBred]

Yeah right...take a picture of that run down fence too while you're at it. That should save you another thousand an acre.

 

[backhoeboogie]

I'd have second thoughts on buying any land without the mineral rights. You realize that if the seller retains the mineral rights you could end up with a gas or oil line run through the property or worse.

Careful there. I have seen a $23K offer per acre for just the mineral rights. No land changing hands. Just sell the mineral rights and keep the land.

Granted most offers are in the $10K neighborhood but some are getting up past twice that much. They are offering $4K an acre and 25% royalty to practically everyone in Tarrant County right now just to lease it from you for three years.

 

[TexasBred]

Backhoe ain't it something. We leased a place we own way over in Johnson County about 6 years ago for $10 an acre and 1/8 minerals. (Gas was unheard of in the area at the time). They're paying thousands an acre now just to lease and 25% royalty. Some of the neighborhoods in Ft. Worth are banding together and getting huge amounts. Somebody better not offer to buy my minerals at $10,000 an acre or they'll be owning the things.

 

[backhoeboogie]

Backhoe ain't it something. We leased a place we own way over in Johnson County about 6 years ago for $10 an acre and 1/8 minerals. (Gas was unheard of in the area at the time). They're paying thousands an acre now just to lease and 25% royalty. Some of the neighborhoods in Ft. Worth are banding together and getting huge amounts. Somebody better not offer to buy my minerals at $10,000 an acre or they'll be owning the things.

If you have minerals in Johnson County, I am really surprised you haven't had someone offer up already. But if you sell for that, you'll lose money big time. Some folks are getting $800 an acre royalty in the really hot zones, per month. 13 months and that $10K is made up. $400 per month per acre is not very good but it sure is nice just the same.

 

[TexasBred]

We're getting royalty checks but have had no additional drilling in the pool although they do continue to drill all around us. Just finished 8 wells across the CRoad next to us. Company says they'll be back to drill more in '09. We'll see. And I know the price to purchase minerals is sky high too so am not really in the market to do so especially if they plan to come back and drill more. Time will tell.