Calculating Cost Per Acre On Large Land Parcels

Determining the cost per acre of large land parcels is a nuanced process that hinges on the principle of “highest and best use.”

Dwain Ammons, Allen Tate listing Realtor®, is a professional North Carolina Real Estate Broker and (WNC) Western North Carolina resident. Whether you’re buying or selling a large acreage land parcel, you can count on personalized, professional guidance. Call today at (828) 447-0036.

This appraisal concept seeks to identify the most profitable and feasible use of a property, guiding its valuation. As a seasoned realtor specializing in large acreage properties with Allen Tate Realtors, I aim to simplify how this determination influences cost per acre calculations. 📞 Call today at  (828) 447-0036 for assistance.

Understanding Highest and Best Use For WNC Large Land Parcels

The Appraisal Institute defines the highest and best use as the reasonably probable use of property that results in the highest value. This assessment considers legal permissibility, physical possibility, financial feasibility, and maximum productivity. For large parcels, this could range from agricultural purposes to commercial development, depending on various factors.

Factors Influencing Highest and Best Use

  1. Zoning Regulations: Local zoning laws dictate permissible uses of land. A parcel zoned for agricultural use may have a different valuation than one zoned for commercial development. Understanding these regulations is crucial in assessing potential uses.
  2. Location and Accessibility: Proximity to infrastructure such as roads, utilities, and urban centers enhances a property’s desirability for certain uses. For instance, land near major highways may be ideal for industrial purposes, while secluded areas might be better suited for recreational or conservation uses.
  3. Physical Characteristics: Topography, soil quality, water availability, and environmental conditions play significant roles. Flat, arable land may be valued for farming, whereas hilly or forested areas could be more suitable for timber production or recreational activities.
  4. Market Demand: Current market trends influence the feasibility of potential uses. High demand for residential development in a region can elevate land values, making residential subdivision a viable highest and best use.

Calculating Cost Per Acre Based on Highest and Best Use

Once the highest and best use is determined, the cost per acre can be calculated using several appraisal methods:

  1. Sales Comparison Approach: This method involves comparing the subject property to similar parcels that have recently sold, adjusting for differences in size, location, and other pertinent factors. For example, if comparable properties used for commercial development have sold for $50,000 per acre, the subject property may be valued similarly, with adjustments made for unique characteristics.
  2. Income Approach: Applicable when the land has the potential to generate income, this approach estimates the present value of future income streams. For agricultural land, this could involve calculating the expected revenue from crop production, subtracting expenses, and applying a capitalization rate to determine value.
  3. Cost Approach: This method is less common for vacant land but can be used when considering development. It involves estimating the cost to develop the land for its highest and best use, including infrastructure and construction costs, then subtracting depreciation to arrive at a value.

Impact of Parcel Size on Cost Per Acre

It’s important to note that larger parcels often have a lower cost per acre compared to smaller ones. This phenomenon, known as economies of scale, occurs because the per-acre value decreases as the total acreage increases. For instance, a 100-acre plot may be valued at $1 million ($10,000 per acre), while a 10-acre plot in the same area might be valued at $200,000 ($20,000 per acre).

Case Study: Agricultural vs. Residential Development

Consider a 200-acre parcel located near a growing metropolitan area. If the highest and best use is determined to be residential development due to high housing demand, the land may be subdivided into smaller lots, each carrying a higher per-acre value. Conversely, if the area lacks infrastructure or market demand for housing, the highest and best use might remain agricultural, resulting in a lower per-acre valuation.

Determining the cost per acre of large parcels through the lens of highest and best use is a complex process that requires thorough analysis of legal, physical, and economic factors. As a large acreage realtor with Allen Tate, I am committed to providing clients with comprehensive evaluations to ensure informed decision-making in their real estate endeavors.

For personalized assistance in evaluating large acreage properties, 📞 Call today at  (828) 447-0036 for assistance.

How Cost Per Acre on Larger Parcels is Calculated: A Guide by Dwain Ammons

When evaluating the value of large land parcels, one of the most crucial metrics is the cost per acre. This valuation is influenced by numerous factors, including location, zoning, topography, market trends, and, most importantly, the highest and best use of the land. As a large acreage specialist with Allen Tate Realtors, I have extensive experience assessing land value across North Carolina. In this article, I will break down how cost per acre is calculated depending on land type and provide specific examples to illustrate these concepts.

Factors Affecting Cost Per Acre

Before diving into land type-specific pricing, it’s essential to understand the overarching factors that influence cost per acre calculations.

  1. Highest and Best Use: The most valuable legally permitted use of the land significantly impacts its price. Agricultural land may be worth less per acre than a parcel zoned for commercial development due to its revenue-generating potential.
  2. Zoning and Land Use Regulations: Local government regulations determine what activities are permissible on a property, affecting its value.
  3. Accessibility and Infrastructure: The proximity to highways, utilities, and urban centers increases a property’s appeal and cost per acre.
  4. Topography and Soil Quality: The land’s physical characteristics determine its suitability for different uses, such as farming, development, or conservation.
  5. Market Demand: Trends in real estate, such as housing demand, industrial expansion, or agricultural trends, affect land pricing.
  6. Parcel Size: Larger tracts often have a lower per-acre cost compared to smaller tracts due to economies of scale.

Cost Per Acre by Land Type

1. Agricultural Land

Agricultural land is typically valued lower than other land types unless it has exceptional soil quality or development potential. Prices range significantly based on location, soil productivity, water availability, and local farming demand.

Example:

A 200-acre farm in rural South Carolina with average soil quality might be priced at $5,000 per acre, while a smaller 50-acre farm with rich soil and irrigation capabilities near an urban market may reach $12,000 per acre.

2. Timberland

Timberland value is calculated based on tree species, age, market demand for timber, and land accessibility. The presence of mature hardwoods or high-yield pine plantations can increase land value.

Example:

A 500-acre pine plantation in North Carolina with well-maintained roads and ready-for-harvest trees might sell for $3,500 per acre. In contrast, young forestland requiring decades for maturity could be valued at only $1,500 per acre.

3. Residential Development Land

Land designated for residential development is among the highest-priced land types, primarily in high-growth areas. Factors like zoning, existing utilities, and location drive price variations.

Example:

A 100-acre parcel on the outskirts of Charlotte, NC, primed for residential development, may be priced at $50,000 per acre due to high housing demand. However, a similarly sized tract in a less developed rural county may only fetch $10,000 per acre.

4. Commercial and Industrial Land

Commercial land, particularly in high-traffic areas, commands premium prices. Industrial land is similarly valuable, often benefiting from its proximity to major transport routes.

Example:

A 20-acre commercial lot with highway frontage in Asheville, NC may be priced at $150,000 per acre, while an industrial lot near a rail hub could go for $80,000 per acre.

5. Recreational and Hunting Land

Recreational land, often used for hunting, fishing, or off-grid living, has a moderate valuation dependent on wildlife presence, topography, and accessibility.

Example:

A 300-acre hunting tract in North Carolina with abundant deer and turkey, a water source, and rolling hills might be priced at $4,000 per acre. In contrast, a more remote or less developed tract could be worth only $2,500 per acre.

6. Conservation Land

Land set aside for conservation, either privately held or under conservation easements, is typically valued lower due to restrictions on development.

Example:

A 1,000-acre tract placed under a conservation easement restricting any future development, might sell for $2,000 per acre, whereas similar unrestricted land could be valued at $6,000 per acre.

The calculation of cost per acre on large parcels is a multi-faceted process, relying heavily on the land’s highest and best use. Agricultural land, timberland, development parcels, commercial and industrial properties, recreational tracts, and conservation areas all have distinct valuation criteria.

As a large acreage specialist, I help clients navigate these complexities, ensuring they make informed land investment decisions. If you are considering buying or selling large acreage in North Carolina, feel free to reach out for a tailored land valuation and market analysis.

Real Estate & Land Development: 20 ways to determine list price and use:

  1. Optimal Use
  2. Best Possible Use
  3. Maximum Utility
  4. Most Profitable Use
  5. Ideal Use Case
  6. Best Utilization
  7. Most Advantageous Use
  8. Strategic Use
  9. Premier Use
  10. Highest-Value Application

Investment & Economic Analysis:

  1. Maximum Return Potential
  2. Best Economic Use
  3. Greatest Value Proposition
  4. Optimal Revenue Use
  5. Top-Yielding Use

Planning & Zoning:

  1. Best-Suited Use
  2. Proper Land Utilization
  3. Smart Use Planning
  4. Most Suitable Development
  5. Efficient Land Utilization

Dwain Ammons, sellers listing broker with Allen Tate really know how to get the most for your large land parcels in North Carolina (828) 447-0036.

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