Raw Land

In many instances, raw land is not zoned for the highest economic use. Raw land is often encumbered by physical defects and legal issues. Examples of physical defects include flood zones, soil condition, and terrain. Examples of legal encumbrances are property liens, easements, unresolved boundary disputes, and encroachments.

In addition, raw land does not usually carry approved access to public utilities, site plans, or the zoning designations to optimize the properties’ values.  These matters must be legally resolved to obtain the preliminary building approvals, and the resolution process is both time consuming and expensive.

Because of this, raw land is valued at approximately 60% of its potential total economic value. More importantly, it is in the investors best interest if they allow the developers lead the entitlement process.

Tentatively Approved Land

Tentatively approved land is property that has been rezoned consistent with the developer’s intended use. At this stage, the property includes a subdivision map that has been tentatively approved by the municipality to ensure maximum economic value. At this point, zoning approval requires an approved site plan, complete hydrology and soils studies, boundary and topographical survey, tentative approval of utility connectivity, and an approved traffic impact study.

These deliverables require unique professional expertise, and they are also expensive.  Hydrology and soil studies require certifications from geologists. Utility location and capacity studies, site planning, traffic studies, and grading plans require civil engineers. Furthermore, legal counsel with subject matter expertise is required to effectively navigate the complex political landscape. It is not uncommon for 3^rd party entitlement costs to range from $25,000 to over $100,000. Historically, the developer contributes all of the entitlement costs and the landowner contributes the time.

Tentatively approved land is valued at approximately 80% of its total realizable value because a significant percentage of the development risk has been mitigated.

Fully Entitled Land

Fully entitled land is property that has obtained the signatory consent of all government and regulatory authorities. For this to occur, the property must have all final development plans approved by all governmental and quasigovernmental authorities. This includes securing the utility providers’ commitments to deliver service, Buildable Improvement Plans, and payment of all utility and impact fees.

The incremental cost to the developer to move from Tentative Approval to Final Approval ranges between $100,000 to over $250,000.

Fully entitled property is rezoned to its highest and most economically viable use. Sunbelt Development & Realty Partners frequently leads rezoning initiatives on behalf of our clients.  We do this because rezoning increases building densities – which, in turn, increases property values to buyers and sellers.  For example, in Las Vegas the R-1 zoning designation grants approval to build 1 property per acre, while R-2 zoning provides for the development of between 6 – 12 units per acre.  Successfully rezoning and entitling a property from R-1 to R-2 may triple the property’s value.

Fully entitled land requires additional capital investment and is valued at 100%.

Finished Building Lots

Finished building lots are completely prepared for vertical development.  This requires additional investment and further eliminates the development and market risk to the builders.  At this stage, all offsite and onsite improvements are complete.  All common area improvements are complete (i.e., streetlights and sidewalks), and utilities are in place (to the back-of-curb). At this stage, the buyer/developer can begin building homes within weeks of acquiring the property.

Developers will pay a 10% premium price for fully developed, finished building lots.

Raw

Finished Lots