How to Maximize Your Investments with Transitional Land
Investment properties come in all shapes and sizes, so specialized knowledge is needed for all types. Whether it’s a Triple Net Sale-Leaseback, a shopping center with a high credit anchor tenant or a medical office building, a deep understanding of the investment is a necessity in order to fully maximize the property’s value. While these types are just a few examples, they are some of the most common in the commercial real estate world.
At one point in time, these vertical investment properties were once an open field that were likely used for agriculture purposes. As a town or city grew, the land naturally turned into a different use. Before re-zoning took place, the ground would have been considered as “transitional land.” Transitional land is land that is in the path of development and can be changed from one use to another to maximize its highest potential. Transitional land is a type of investment that is not talked about a lot. Often times, you will hear someone say, “that will be a subdivision someday” or “a gas station would be great here.” The ones who can see these development opportunities early in the game can maximize their investments tremendously.
So, how do you spot a piece of transitional land you see as an opportunity to develop or sell to a developer while also managing your risk of buying a non-income producing property? Being aware of the market you are working in and knowing what areas are running out of currently zoned land is crucial. You’ll also need to be able to forecast where the development will be expanding to next. Some key indicators to this answer are proximity to major corridors, the city’s future infrastructure plan and areas where businesses are expanding.
Transitional land tracts offer investors many different routes to take with their investment. In the early stages, a buy and hold strategy is great for a long-term investment. Further along in the investment, an investor could acquire a property, go through all of the pre-development due diligence and sell off to a developer to collect a profit for a more short-term hold. Transitional land is not subject to one single asset class of real estate. Depending on the area, your land could be in the path for commercial, residential or a mix of both.
Overall, the investment approach to transitional land is a very specialized investment path, but can yield great returns for the savvy investor with a sharp eye. It is important to have a highly skilled team around you who are experts in transitional land in the market you are working.
About the author:
Trevor Hawkins is a real estate agent with United Country | Heartland Realty and Auction LLC in Bowling Green, Ken. He has a background in development and construction and is well-versed in site selection for commercial and residential developments. He is also pursuing his Accredited Land Consultant and Certified Commercial Investment Member certifications.