Evaluating the Indiana Land Market

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Evaluating the Indiana Land Market
By

Bart Waldon

Indiana has a thriving land market, with over 90,000 farms covering nearly 15 million acres across the state. Farmland, forests, and undeveloped parcels are all actively bought and sold. As an investor or landowner, understanding factors that impact valuation is key to making sound decisions when assessing potential purchases or determining listing prices. This article will explore recent land value trends in Indiana and equip you with knowledge critical for evaluating parcels in this dynamic market.

Land Prices and Trends in Indiana 

Over the last decade, Indiana has seen a steady appreciation of land values across all categories of use. According to Indiana Farmland Values and Cash Rents reports, the average per-acre price of farmland rose from $4,090 in 2012 to $7,802 in 2022 – a 90% increase. Areas like Tippecanoe County have averaged gains of 6-8% annually, while more urbanized counties near Indianapolis exceeded 12% yearly returns. Forestland and undeveloped recreational parcels enjoyed similar uptrends over this stretch.

Driving these rising valuations are several key factors. Primary among them is ongoing development expanding out from regional hubs like Fort Wayne, Evansville and Bloomington. Demand for suburban housing, commercial sites and farmette-style lots has increased, boosting prices for adjacent farmland. Improving crop yields and higher commodity prices have also raised returns on agricultural lands. Buyers priced out of California, Oregon and Washington are also bidding up values on Indiana recreational lands offering abundant water resources, timber and rolling topography.

Key Factors Influencing Land Valuation 

When determining a fair market price for land, several elements merit close inspection:

Location – A parcel’s proximity to local economic centers directly impacts its desirability and value. Lands within 50 miles of major transportation routes and cities will often achieve premiums ranging 25-85% above similar outlying sites. Factors like access to skilled labor, infrastructure, schools and emergency services are baked into these valuations.

Land Use – Zoning and land use regulations also factor prominently. Lands zoned for commercial, warehouse or high-density residential uses often sell for 2-5 times more than agricultural or low-density parcels. Even approval for ancillary uses like mineral/timber rights or renewable energy projects can drive values 35% higher.

Size – As with home sales, bigger is often better with land transactions. Owners of smaller tracts have fewer potential buyers, limiting marketability. Parcels sized under 160 acres can trade 30-50% below the per-acre price of bigger contiguous blocks. Exceptions exist for lands in high-demand zones suitable for partition sales.

Access – Convenient frontage on state highways, county roads and public easements adds significantly to a parcel’s use and liquidity. Difficult-to-access sites often struggle to attract buyers unless marked 25-45% below comparables. Similar discounts apply to land-locked parcels lacking road access or abutting devalued properties.

Quality – A tract’s topography, drainage, resources and improvements also sway pricing. Relatively flat, cleared lands ready for building permit faster sales at higher valuations than uneven sites requiring extensive site work. Lands holding marketable timber, minerals or water rights also trade 10-35% higher than their peers.

How to Calculate a Parcel’s Market Value 

When aiming to pin down a market-supported value on a specific land parcel, several proven methods apply:

Sales Comparison Approach – Finding recent sales of similar nearby properties based on location, size, use and access provides a meaningful value baseline. Tracking down this data through county assessors and deeds offices takes digging, but offers real-world comps. Adjusting for property differences helps fine-tune estimates.

Income Capitalization – For income-generating lands like farmland, timber properties or leased hunting grounds, capitalizing the annual income by prevailing regional rates derives a valuation estimate. This method hinges on using appropriate cap rates and accurately measuring earning potential.

Cost Approach – While less common for raw land, this technique can provide supplementary value guidance. It entails combining the estimated current sale price of the land itself, plus the depreciated cost of any site improvements like outbuildings, wells or fencing.

Engaging help from a professional appraiser is advisable for certified accuracy before entering high-stakes deals. For best results, focus valuation estimates on a property’s highest and best legal use allowed under local zoning rules.

Negotiation Strategies for Buying/Selling Land 

In Indiana’s competitive land marketplace, creativity and perseverance in wheeling and dealing can make or break an acquisition/liquidation. These tips may prove useful whether buying or selling:

  • Thoroughly research sales histories over the past 2-5 years for comparable properties, noting bargaining ranges, days on market etc. These provide powerful data to inform pricing strategies.
  • Make initial offers below perceived market value on buys or above on sales. Expect counteroffers, leaving room to find common ground. Consider creative terms like owner financing or land swaps to bridge gaps.
  • Be prepared to walk away from mispriced properties, then monitor listing statuses, price changes and county records for any new sales activity. Use these to recalibrate offers during future negotiations.
  • Recognize that liquidating excess land often requires significant patience. Even desirable parcels can take upwards of 24 months to attract buyers amid right financial/logistic circumstances.

Why Invest in Indiana Land?

Strong Returns 

Historically Over the past 20 years, Indiana land has generated robust returns for investors seeking both cash flow and equity gains. As the Indiana Chapter of the Realtors Land Institute Tracks, average farmland values increased 5.2% annually from 2000-2020 with some years exceeding 12%. More recently from 2012-2022, developmental land values skyrocketed over 140% statewide thanks to expanding suburbanization. With massive investments continuing to flow into infrastructure supporting commerce and residential living, all signs point to consistent if moderating future returns.

Favorable Operating Conditions 

In addition to upbeat value accretion, Indiana’s affordable cost of living, business-friendly policies, and incentives for farmers and alternative energy producers make owning and operating land here advantageous. Property tax rates rank below all bordering states, saving landowners thousands annually. Cooperative state and local governments tend to embrace growth too. These factors enhance net profitability for crop producers and other property income streams.

Dynamic Transformation Underway
Significant public and private investment continues pouring into Indiana transportation networks, utilities infrastructure, commercial development and livable communities growth. For example, the I-69 extension continues incrementally expanding, better linking regional hubs and unlocking new economic potential. This gradual geographic transformation enhances land desirability and values across an expanding footprint. Owners able to acquire and hold strategic parcels stand to benefit greatly long-term from inevitable demand growth and mobility improvements underway across Indiana.

The bottom line is that macroeconomic trends and public-private initiatives promise to bring more jobs, businesses and households to all corners of the state in coming years. Landowners able to capitalize by offering strategically located raw land, shovel-ready building sites, leased farm ground or other turnkey real estate stand ready to profit.

The Bottom Line 

Navigating Indiana’s complex rural land market requires sharp analytical skills and dogged determination. While leverage factors like location and parcel usability dominate pricing, creativity in deal structuring cannot be overlooked. By mastering property valuation methods and understanding landowner motivations, buyers and sellers alike gain an advantageous edge.

Frequently Asked Questions (FAQs)

What areas of Indiana tend to have the most valuable land?

Generally speaking, land closer to major cities and transportation corridors holds the highest values. Suburban counties near Indianapolis, Fort Wayne, South Bend, and Evansville tend to top the list thanks to strong development demand. But even rural hotspots near universities like Purdue or IU Bloomington or tourist towns like Nashville and Bloomington also trade at premiums.

How fast is farmland values rising in Indiana compared to other Midwest states?

Over the last 20 years, Indiana farmland values have risen at very competitive clip compared to other leading farm states. From 2000-2021, Indiana posted a 5.2% annualized increase according to industry reports. That handily outpaced Iowa at 4.1% and Illinois at 4.7% over the same period. Only Nebraska and Minnesota saw faster growth rates among 10 big farming states.

Besides farmland, what other types of rural land are increasing in value?

Recreational and woodlands have become hot commodities recently. As rural estates, luxury cabins and greenery replace corn and soybeans, these lands often become “transition properties” en route to eventual development. Savvy buyers have latched onto forested tracts with water features, rolling topography and good accessibility at reasonable prices before word spreads more widely.

How much research should I do before buying vacant land in Indiana?

Experts strongly advise thoroughly studying recent sales histories of at least 10-12 comparable nearby properties before negotiating deals. Knowing the location, size, selling price and property details of similar recent trades gives investors and owner-occupants stronger leverage during offer stages. Site visits and soil tests provide added insight on development potential.

What creative offers sometimes convince reluctant land sellers?

With patience key to closing deals, flexible terms often seal the deal. When market valuations and seller expectations don’t align, buyer financing, land swaps, phased sales, and purchases allowing delayed occupancy motivate sellers to concede on price. Savvy buyers make initial offers knowing negotiations play out over time.

About The Author

Bart Waldon

Bart, co-founder of Land Boss with wife Dallas Waldon, boasts over half a decade in real estate. With 100+ successful land transactions nationwide, his expertise and hands-on approach solidify Land Boss as a leading player in land investment.

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