How to Invest in Illinois Land?

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How to Invest in Illinois Land?

Bart Waldon

As a crucial U.S. agricultural and industrial hub, Illinois presents savvy real estate investors high-potential opportunities spanning its varied geography – from eventual exurban development sites fronting major metro regions to discounted rural tillable acreage anchoring heartland farm belts prime for consolidation. With multiples valuation tailwinds stacked favorably over long-term holds, the state contains fertile conditions growing wealth for those targeting key land investment niches intelligently.

Let’s review essential data, strategies and execution checklists guiding capital allocation decisions across Illinois’ diverse soil-rich asset class:

Understand Broader State Real Estate Drivers

Before assessing granular county-specific prospects, what headline statistics indicate Illinois represents an attractive land investment environment overall?

  • Chicago MSA housing inventory declines over 60% since 2019 as building fails keeping pace with organic population demands
  • Illinois median home values rise over 15% in 2022 outpacing broader national appreciation rates
  • Farmland values per acre grow approximately 5-10% annually even despite headwinds impacting agriculture operator profits minimizing annual crop yields
  • The state population expands steadily thanks to domestic migration inflows from high-tax coastal states like New York and California seeking affordable areas unlocking jobs

With high barriers limiting housing supplies meeting surging family needs throughout Illinois – yet Midwest farmland availability offering food production security domestically – key factors elevate residual land values across cycles over decades. Growth runways extend long visibility.

Determine Localized Investment Targets

Not all Illinois regions offer equal site potential and robust ROI outlooks over holding periods. Instead real estate fundamentals should guide capital towards more specific metro zones evidencing both recent development momentum and future infrastructure catalytic drivers likely boosting valuations higher incrementally each year.

1. Chicago’s High-Demand Collar Counties

The greater Chicagoland area unsurprisingly offers immense appeal between considerable corporate employers anchoring the workforce, top-tier education systems sustaining talent pipelines long-term and the area’s central continental location enabling efficient transport /logistics.

Yet directly competing for lot deals in Cook County against equity-rich developers proves unrealistic for smaller buyers.

Thus turn attention toward Kane, McHenry Lake Counties instead where improved highway accessibilities enable residents easy big city commutes while securing larger acreage plots at reasonable per acre prices during early exurban growth waves now occurring.

Target Entry Land Pricing: $15k - $25k per acre

2. Central Illinois Farmland

Between Chicago/Rockford and Springfield, rural counties like DeKalb, LaSalle, McLean and Champaign feature some the state’s most prolific grain and livestock production zones where asset values react most acutely to commodity price fluctuations.

Yet gradual generational transfers and corporate agricultural competitors consolidating smaller family plots for operational economies of scale provide down buying opportunities at reasonable basis levels for those holding through entire farming boom/bust cycles over decades.

Target Entry Land Pricing: $7,500 - $12,000 per acre

Perform Due Diligence Checks on Sites

Once attractive geospatial zones identified and potential deals sourced by savvy brokers near these locations, conduct additional due diligence confirming parcels suit intended usage plans over 5-10 year holds.

Development Land Investigation Keys:

  • Confirm no prohibitive wetland delineations or flood zones limiting builds through surveys
  • Verify soils drainage capacities support foundations through perc tests
  • Crosscheck zoning codes allow reasonably high density residential usages
  • Ensure highway accessibility easing commutes staying where millennials relocate

Farmland Investment Considerations:

  • Inspect soils productivity ratings optimizing crops possible to grow
  • Review any USDA conservation program eligibility providing added income streams
  • Check water rights access availability without disputes from drainage districts
  • Consider storing grain onsite saving shipping costs to central co-ops come harvest time

While greater rewards exist targeting lands with preparation needs pricing discounts accordingly, ensure no major red flags exist preventing executable projects later or forcing values far below replacement expenses if issues arise. Validate key assumptions upfront.

Set Conservative Per Acre Buy Targets

When underwriting asset acquisitions, lean towards more conservative cost valuations avoiding risky overpayment bubble dynamics seen in previous real estate cycles. It remains better reserving flexibility holding cash flows for 7-10 years than attempting flipping sites quicker counting on assumed short-term gains alone later justifying extreme buy figures never materializing once markets correct.

We recommend following per acre valuation maximums when evaluating Illinois land deals:

Exurban Development Parcels

  • $20k per acre or below in Chicago metro northern counties
  • $15k per acre or below downstate surrounding secondary cities

Productive Farmland

  • $12.5k per acre and below for Central / Northern Illinois tillable lands
  • $10k per acre and below for Southern Illinois ag holdings

As with any investments, firearm diligent valuation strategies provide downside cushions against market volatilities for farmland and development land holdings alike while improving dividend yield potentials over multi-year carry periods. Pay what makes sense per acre and avoid overextending just hoping eventual valuation multiple expansion covers overly optimistic entry pricing - unlikely.

Secure Profitable Exit Strategies Upfront

Investments only prove worthwhile once dollars actually returned pocket through liquidations reclaiming invested capital gains ideally at healthier multiples than when first allocated into projects.

Thus, from outset evaluating prospective Illinois land deals, pre-plan taxation-optimized exit pathways guaranteeing ability cashing out holdings later at desirable targeted peak values.

Development Land Ideal Exits Include:

  • Subdivide larger parcels into individual half-acre lots fetching 2X+ entry costs per smaller plot from residential buyers wanting vacant canvas building custom estate homes/farms
  • Construct main access roads opening territories followed by instillation of electrical/sewage infrastructure to support housing subdivisions. Then sell improved lands to regional home developers seeking permitted properties ready vertical building at much higher predetermined valuations
  • Hold through eventual area buildouts allowing municipalities to assess parcels at highest-best valuations for tax purposes - then leverage 1031 Exchanges swapping into next land deals further perpetuating tax deferral compounding benefits

Farmland Returns Maximize Through:

  • Cash renting acreage at 6-8% annualized yields of total capital allocated based on soil productivity over a decade
  • Outright selling land itself when peak regional valuations hit perhaps benefiting from agriculture commodity super cycles or supply squeezes in 20-30 year eventual horizons

In both cases - PATIENCE pays off just as much as initial value buy discipline guarantees jackpot payouts later after seasons pass organically lifting all values higher through macro tailwinds and micro location strengths both capitalizing simultaneously.

Frequently Asked Questions (FAQs)

What transaction fees should I budget acquiring vacant land?

Typical closing costs tally 1-3% of total purchased price including legal conveyance filings, title policy binders, municipal transfer stamps and lender loan origination points if financing balance initially.

What yields commonly target from land investments?

Bare development lands average 5-10% unlevered returns over 5-10 years as value appreciates through residential buildouts and infrastructure connecting regions. Farmland rents or crops produce consistent 6-8% annual cash flow yields plus gradual valuation upside long run.

Does Illinois tax land assets uniquely over other states?

Yes - non Homestead exempt land owned by investors does face heavier assessments than Indiana or Iowa comparatively. But higher property taxes get offset by Chicago corporate tenant lease profitabilities exceeding other lower-cost Midwestern cities typically.

Should I consider buying land outside Illinois also?

Diversifying holdings across nearby states provides geographic operational risk balances. Target Wisconsin for timberlands. Pursue Iowa for additional farmland revenue crop alternatives. And locate distribution facility warehouses in Indiana or Ohio maximizing logistics centrality established locally.

What due diligence must complete when assessing land deals?

Conduct zoning analyses confirming legal density allowances ahead of time. Perform environmental testing for contaminants involving previous commercial usages. Have civil engineering experts verify absence of complicating site factors upfront considerably minimizing acquisition risks rather than assuming everything checks out later. Pay a bit more initially setting up success properly.

Mindful farmland and suburban development land investments leveraging Illinois’ high-barrier real estate attributes provides a strategic inflation hedge holding tangible assets benefiting from continual value step ups over long-term decades. Just remember - patience truly becomes the most lucrative virtue when owning irreplaceable ground itself!

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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