Many people think that Investing in Raw Land is like gambling on a horse race. You can increase your odds by careful research, but once the race has started or the land is purchased, what happens is pretty much out of your control. Many factors affect the value of land that a property owner can’t control. These factors include supply, demand, market factors, interest rates and growth patterns. However there is one thing that the property owner has some control over. It is that "bundle of legal rights and protected interest" that also determine the value of Real Estate.

When it comes to Real Estate, Florida is one of the most highly regulated States in the Union. There are regulations telling what you can build on your land, where you can build on your land, and when you can build on your land. Two adjacent parcels that appear identical may have substantially different values due to differing land use entitlements. While this heavy regulation make the process of increasing the value of your "bundle of rights" more difficult, it also means greater rewards when you achieve full entitlements for the highest and best use of your land.

David Lynn, Phd, Director of ING Clarion Research & Investment Strategy says "The risky and potentially lengthy entitlement and development process offers high potential returns". The attached Graph produced by Dr Lynn shows that Entitled land in Florida typically sells for three times the price of Unentitled land. In California and Hawaii, which are even more regulated then Florida, the Entitled price is five to seven times the Unentitled price! Of course, to maximize value it helps to be entitled for a use that is in demand. If you have entitlements to build multiple residential units in a market that is saturated with housing units, the property will not have a high value, but it is still worth more then an identical parcel that is only suitable for agriculture.

It is important that we define what "Entitlement means. At one time in Florida it meant having an approved Land Use or Zoning. In today’s regulatory climate, having land use is not enough to assure the land can be fully utilized. Concurrency, wetlands, hazardous waste and endangered species can all effect your right to build. Now a days it is prudent to define "Entitled as having all the land use and permitting issues resolved so that all a user needs to do is submit a site plan and building permit. The closer the land is to "Shovel Ready", the more valuable it becomes. In the Land Use and Permitting arena, the more certainty, the higher the value.

The smart landowner will use these troubled times to increase the value of his "bundle of legal rights". Despite the downturn, Florida’s regulatory climate continues to get more and more difficult. New water quality regulations have been mandated by the EPA, and there is the ever looming possibility of the Hometown Democracy amendment passing. While these new restrictions present problems, they also present opportunities for those with fully entitled land.

By: K Dan Shalloway

www.dshalloway.com