by Marc Goodin
Too often land buyers are overpaying for land because they do not understand the difference between the parcel acreage and the usable acreage. Due diligence for two main items is a must to determine how much of the parcel area is really usable land in order to determine the real land value.
Without a clear understanding of each of these items, you do not know if you buying a goldmine or a landmine.
Item1 is to clearly understand the zoning ramifications. Many people believe zoning from one town to the next or even one zone to the next is similar. Not true! Before looking for land in a given town is important to either obtain and review the zoning regulations or meet with your engineer to review the regulations.
Some of the first items to check out are building yard setbacks, building coverage limits, impervious coverage limits, wetland setbacks, and architectural standards. Multiple times I have seen regulations reduce the permitted building area and costs significantly. In other words, you have to buy 40 or 50% more land to get the same building square feet.
For example, I would estimate the most common front yard building setback is 50 feet from the city road. But quite often I have seen the front yard setback at 75 or 100 feet and even 150 feet in some cases. And when your property abuts a residential zone even larger setback are often required. In certain downtown zones, you may even have zero setbacks from the property line.
If your site had 800 feet of frontage the difference between 50 and a 100 foot setback would be 800' x (100'-50') = 40,000 sf or almost an acre of land.
One major zoning regulation that is often overlooked initially, is the permitted impervious coverage and or building coverage limits. They are typically a percent of the total site area.
Many cities have no impervious coverage limits and others have severe coverage limits such as a maximum coverage limit of 25 percent. In the 25 - 30% building coverage limits, you almost need DOUBLE the land to get the same building size.
Item 2 for land evaluation is to clearly understand any negative land features and their ramifications.
Most people are aware of the need for a phase 1 environmental study. If the land is polluted it can literally cost more than the land is worth to clean up. So a Phase 1 report should be done during the due diligence period. Why wait until you have paid for site plans and building plans to find out there are pollution-related problems?
Wetlands kill many deals. Wetland delineation in the field should be one of the first things to be completed. Wetland buffers or setbacks often range from 25 feet to 300 feet. But just because you know the typical wetland buffer does not mean you understand the whole picture. It is very important to discuss the quality of the wetlands with your soil scientist as buffers can be increased significantly more than the printed setbacks in certain cases such as when wetlands are breeding grounds for certain at-risk animals.
Endangered species can delay a project and or require expensive studies, larger buffers, and other costly mitigation. Checking the States endangered species database to see if a site might have an endangered species is easy and again should be done as one of the first steps in the design process.
Steep, even moderately sloped topography can reduce the building area and add significantly to the project cost. For example If a 7 acre site drops off 6 feet from the road to the back of the property and an average of 2-3 feet of fill has to be brought to the site to create a level pad, the added Construction cost can easily add hundreds of thousands of dollars. The same goes if the sites that rise from the road and excess material have to be hauled off the site. In some cases, the site can be regraded to build a level pad. This can still be a significant cost factor but is much better than hauling material on or off the site.
And even before you spend $$$ on experts, significant data is often available online for free. Above you have the topography and wetlands with a 5-minute search online. And don't forget a sit walk can often uncover items like wetlands, ledge, topography concerns and easements, etc.
During the due diligence period, the borings and Geotech report should be completed to ensure no unsuitable soils will add to the cost. The three most common underground problems are trash or junk fill placed on the site in the past, ledge or unsuitable soils that will not support a typical foundation. Often you will not even observe the trash from a site walk because it was placed so long ago that the trees and vegetation have covered it up. Ledge may or may not be observed on a site walk If ledge is encountered that has to be blasted and removed it can break the bank.
Learn as much as you about the land before you make an offer and then really dig in early during the due diligence period and be prepared to renegotiate if problems are found. Have a question? Feel free to give me a call at 860-830-6764.
Get more information on Storage Authority Franchise at www.storageauthorityfranchise.com/opportunity3
Marc Goodin is the President of Storage Authority Franchising. www.StorageAuthorityFranchise.com He owns 3 self-storages he designed, built, and manages. He has been helping others in the self-storage industry for over 25 years. He can be reached at marc@StorageAuthority.com or directly at 860-830-6764 to answer your franchising, development, marketing, sales, and operations questions. His best selling self storage books are available on Amazon.