From the soil on up to often times obscure land use ordinances, purchasing land is a complex endeavor not to be taken lightly.
From the soil on up to often times obscure land use ordinances, purchasing land is a complex endeavor not to be taken lightly. Among myriad land investment risks is one that’s sometimes overlooked--environmental factors that could negatively impact a parcel’s value.
Below is a summary of environmental factors to consider before purchasing land. Not all are applicable in every land situation, as how the land can be used will determine, in part, how environmental factors could impact its value. Regardless, as you evaluate land for purchase, keep the following broad categories in mind during your due diligence process.
Don’t overlook soil quality data for your prospective land purchase, particularly if you are buying land zoned for agricultural use. There are cases when soil gets contaminated via natural causes, but most soil issues stem from manmade activities, like dumping, agriculture run off or accidental chemical spills.
In some cases, environmental risks might be visible, like empty pesticide barrels in a wooded area of the property. In many situations, soil quality risks might be very difficult to asses by walking through the property. As part of your due diligence, it’s critical to review all available documents related to how the property was used in the past and any prior soil tests that might have been completed. This will give you a window into what risks exist and enable you to make an informed decision about whether additional testing needs to be completed. Hiring a commercial real estate expert to help, or contracting with an environment assessment firm, might be the right path depending on what clues you uncover during the process.
Access to uncontaminated water sources on your property is also important to protecting the land’s value, particularly if you’ve purchased land for residential development purposes. In more rural areas not connected to municipal water sources, inspecting wells or digging wells could reveal both environmental risks or additional site prep expenses.
On the environmental side, hiring a professional to test water quality is an expense that’s well worth it to determine the scope of remediation and the associated costs and risks. It might also be advisable to test existing streams and springs on the property; runoff from farms or a factory miles away could appear in your property water sources, which in turn could impact your soil quality and overall land value.
On the site prep side, you’ll need to gather information about the water table, well depth and expected flow rates as part of your due diligence.
Beware of that charming little creek meandering through your future property. That little creek could have the potential to flood your land. Don’t take anything for granted. Research the local floodplains and flood ways to make sure you’re not buying land that’s at risk and will require purchasing additional flood insurance policies. The Federal Emergency Management Agency (FEMA) has ample resources to help you better understand the flood risks of a given parcel.
If your land has public sewer access you don’t need to worry about a Perc test. If your land is in a more rural area, a Perc test is critical, particularly if you’re looking to build on your newly purchased land.
A Perc test, or Percolation Test, evaluates how quickly water drains through the soil. Passing Perc test regulations allows the installation of a septic system and often determines the size of the home you can build. A failed Perc test, or a Perc test that reveals slower absorption rates, could drastically impact the value of your land and significantly limit the size and number of homes you’re able to build on it.
Purchasing land and then discovering there are wetland protection regulations for segments of your property can be a value killer. Again, committing to the drudgery of due diligence can save you major headaches down the road. There are varying ways to evaluate potential wetlands, some are complex and time consuming and others can be done online. The only way to be absolutely sure there are no wetland restrictions on your property is to hire a wetland consultant or have a government entity perform an assessment. If you don’t have time for that process, there are online tools you can use to get a general sense of your risk level:
Land purchases are often more complicated than you might think. However, by being committed to performing due diligence and partnering with land experts you’ll be able to create a risk-reward profile that can help you make smarter land purchase decisions.Thoughts? Comments? We’d love to hear from you.