Published on Thursday, March 26, 2015 by Land Century
Without doing more than the most perfunctory search online you can find land for as little as $5,000 or less for an acre, but what does that really get you? And if your purchase is with an eye to development, is this cheap land going to be located where prospective buyers are going to want to live?
The equations around buying California acreage for development are pretty simple: if the land is located somewhere near a place people want to live, it will cost more; if the land is remote, or is inconvenient, unpleasant or downright dangerous, it will cost less.
So if you find a plot of land in the Golden State that is really cheap theres a good chance that there will be no infrastructure nearby: no power, no telephone or internet, no water supply, possible no access road, there may be restrictions on what or how you can build; potential problems can really mount up!
So your development budget will have to take all that into account and add the cost of providing all these services to the land in addition to the cost of building the properties and of course the land itself. Only once youve done all the calculations can you estimate how much the properties you build will have to sell for if you want to make a profit.
Of course, if you just want to build a home for yourself, then its a little easier to calculate: If your budget is say $1,000,000.00, then the land you buy should cost you around $400,000.00. If your budget is $500,000.00, then you should be paying around $180,000 to $200,000 for the land.
Development land, however is about profit, so you cant make the same snap calculation.
And where should you be buying?
If youre coming into the California land market without any previous experience or preconceived ideas about location then you have a few choices to make regarding location: North or South? Inland or Coastal, Rural, urban or something in-between?
Most people, however, have some idea of where they want to buy, so their choices will be governed by that idea. Someone who has their heart set on something within commuter distance of San Diego isnt going to be looking at plots in Napa for example.
This means that theres really no best place to buy your land; only the best land for your purposes and within your budget.
So lets look at a few areas around the state that could provide the return on investment youre looking for.
Lets start with the crossroads of I-5 and I-80: Sacramento and the land around it. Theres a huge choice of land for sale in and around Sacramento, and prices vary enormously depending on location. Outside of the city much of the land is agricultural, and while a high proportion of it is located in areas of high development, there are areas particularly to the north of the city-that are not currently as sought after by developers. However, high quality agricultural land is often expensive to buy.
Moving towards the coast and into the catchment area of San Francisco, the bulk of the land is urban, and consequently tends to be small parcels and high price tags. The city has some fine agricultural land nearby, but this is all being targeted by developers, and so again, when land comes up for sale, the popularity of the area may push it beyond many potential developers budgets.
Moving South along the line of I-5, the landscape is primarily dominated by agriculture, and bounded by mountains: Land here is of an extremely high quality, and is also in a region that is under substantial pressure by development, so once again we face the dilemma of limited supply, high demand and big prices.
Towards the coast we can find pockets of cheap California land that are probably more affordable, as they are less likely to be cultivated in any serious way, except perhaps right along the coastal strip. However, this stretch between say Monterrey and Santa Barbara may be worth a closer look as long as you dont feel the pressing need to be closer to one of the bigger cities.
South of Santa Barbara and you start to come into the gravitational pull of greater Los Angeles, which is definitely going to be worth a look if urban is your thing, but in general youll have to part with a lot more money per acre, and the parcels will of course be smaller than youll find on offer in more rural settings. The land surrounding Los Angeles is mostly federal, and so off limits for the potential developer.
Going south and its not long before you hit San Diego, where again the pressure on what land is or becomes available is high, pushing prices up. Again, you have to make a judgement call on whether you want urban, suburban or rural land for your project, and shop around for something that suits.
Ultimately, wherever you choose to look for California land to buy, you will need to take all care and due diligence when you come to make a purchase; nothing is for nothing, and if a plot of land looks perfect, and costs peanuts, then theres going to be something there that might stand in the way of a decent profit, and could ultimately cost you dear.