Is Massachusetts Land a Good Investment?

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Is Massachusetts Land a Good Investment?
By

Bart Waldon

If you're thinking about buying land in Massachusetts, you're not alone. The Bay State has a lot going for it - a strong economy, top-notch educational institutions, vibrant cities, quaint small towns, and plenty of natural beauty. With such a desirable location, it's no wonder land investing is on the radar for many buyers.

But as we know, real estate - and land in particular - is highly location dependent. While Massachusetts land has excellent long-term appreciation potential in many areas, there are also risks and downsides to be aware of. So does it make sense to buy land in Massachusetts? Let's take a closer look.

What Makes Massachusetts Attractive to Land Buyers

There are some fundamental strength that make Massachusetts appealing for land ownership from an investment perspective:

  • Highly-ranked public school systems - For families or developers looking to build, quality schools are a huge factor. Massachusetts is renowned for educational excellence from top universities to widespread K-12 systems. The schools are a major draw.
  • Thriving job centers - The Greater Boston metropolitan area alone boasts hundreds of thousands of high-paying jobs, with a major tech and biotech hub. Western Mass also has employment centers in cities like Springfield. Job prospects attract residents.
  • Tourism and recreation - From the Berkshires to Cape Cod, Massachusetts offers tremendous natural assets for fun outdoors. Tourism flourishes in these regions, where owning an inn or recreation-based business can be lucrative.
  • International appeal - Boston particularly attracts immigrants and foreign investors who see Massachusetts as an attractive place to live, work, and invest capital. This global influx stimulates real estate.
  • Prestige factor - Let's be honest, owning property in world-class educational hub Massachusetts carries a certain panache. The state's enduring prestige lends an elevated status.

With such strong demand drivers, it's easy to see why land in many Massachusetts markets commands high prices. Opportunities exist for long-run returns in communities capturing population growth.

Massachusetts Land Prices - Expensive But Stable

Prime land in Massachusetts comes at a premium cost. The state consistently ranks among the most expensive for real estate - especially closer to Boston.

In suburban and rural regions, large undeveloped "raw" acreage can still sell for $100,000 an acre in some towns. Lots designated for housing frequently sell for $300,000 and up before factoring in home building costs.

Massachusetts land prices reflect high demand relative to limited supply, especially in communities restricting new development. Yet the markets are fairly stable with moderating rises in recent years versus the frequent boom and bust cycles seen out West.

While expensive, Massachusetts real estate retains its value well overall. Home prices weathered the 2008 housing crash better than most of the country, with less foreclosures and shorter price declines. The same general stability extends to the land market.

For buyers entering the market, the high valuations make investing in Massachusetts land a longer term play. Patience is required to ride out the inevitable ups and downs.

Key Locations for Massachusetts Land Buyers

Massachusetts covers over 10,000 square miles, so land investing opportunities differ greatly across regions. Here are some of the most popular areas to focus a search:

  • Boston Metro - Exurban towns within commuting distance of Boston see tremendous demand for buildable lots and raw acreage. But extreme congestion makes further developing here challenging.
  • North of Boston - The North Shore is one of the priciest regions, but Newburyport, Ipswich, and seacoast towns remain highly desired. Watch for parcels allowing subdivision.
  • Western Massachusetts - The Pioneer Valley and Berkshires offer more affordable land within striking distance of metropolitan regions. Recreation and tourism thrive here.
  • Central Massachusetts - Worcester County towns mix relative affordability with proximity to Boston. Improved commuter rail access enhances appeal.
  • Cape Cod and Islands - Coastal land is in a league of its own pricing, but the lure of living on Cape Cod or Martha's Vineyard fuels sales.
  • South Coast - Fall River, New Bedford and coastal areas boast reasonable pricing and opportunities for growth as these cities revive.

Market-savvy local agents are invaluable finding deals and evaluating comparables. They know the neighborhoods poised to flourish. For out-of-state buyers especially, boots-on-the-ground expertise is a huge asset.

Developing Raw Massachusetts Land

For savvy investors, one of the potential upsides of buying Massachusetts land is developing it into commercial properties, housing, mixed use, and other profitable projects when the timing makes sense.

Demand for new housing across Massachusetts remains intense with inventory lagging well behind buyer desire. Constructing residential developments is attractive, if challenging.

Some factors to weigh on the development front:

  • Zoning - What uses are allowed on the land? Residential, commercial and industrial zoned land has the most potential. Rezoning battles can ensue trying to change usages.
  • Permitting - Massachusetts has a reputation for difficult, lengthy permitting processes for new construction. Deep expertise navigating approvals helps projects succeed.
  • Density allowances - Some communities maintain low density requirements despite soaring demand. Building more units per acre makes projects economically feasible.
  • Infrastructure - Land lacking road access, utilities, etc. requires major capital investment to prepare for construction. This impacts costs.
  • Environmental issues - Wetlands, rare species habitats, and other environmental constraints can limit buildable land, adding complexity.

When market forces and regulatory conditions align, profits from developing Massachusetts land can be substantial. But the barriers to profitable construction also pose pitfalls to avoid.

Risks and Downsides of Massachusetts Land Investing

While the Massachusetts land market holds appeal, owning vacant property here comes with significant risk factors to weigh against the potential rewards:

  • Limited inventory - In some communities, a finite amount of "easy developable" land remains before runing into conservation land, protected open space, wetlands and other barriers. Finding viable parcels gets harder.
  • Recession impacts - In economic downturns, land values can decline sharply versus structures on developed properties. Discounts appear, but the declines make it difficult to sell.
  • Carrying costs - From property taxes to interest payments on leverage, the expenses associated with raw land can pile up quickly. No immediate income offsets these costs.
  • Speculative value - It's impossible to predict future pricing. Land may fail to appreciate as quickly as expected - or at all. Local market shifts can leave owners stranded.
  • Long sales timelines - Raw land takes patience to sell, with typical marketing times of 1-2 years not uncommon. It lacks the quick liquidity of securities.
  • Natural disasters - While not a high risk in Massachusetts, damage from flooding, fire, or other events can unexpectedly impact land condition and appeal.

The considerable capital required to acquire prime Massachusetts land also poses barriers to entry for many individual investors and smaller developers.

Expert Tips for Massachusetts Land Buyers

If you decide the potential rewards outweigh the risks, what steps can set you up for success buying and owning Massachusetts land?

  • Seek discounted off-market deals - In such a competitive market, finding below-market parcels before they list provides advantages. Land-focused brokers and networks can assist.
  • Favor infill parcels - Land surrounded by existing housing and amenities makes intuitive sense. But also consider up-and-coming outer regions on the cusp of development.
  • Improve curb appeal - Simple brush clearing, removing debris, and basic landscaping can boost perceived value for buyers. Optimize road frontage.
  • Research permitting - Explore what approvals will be required before committing to a site. Underestimating entitlement costs is problematic.
  • Hold long term - The Massachusetts market moves in cycles. Don't panic sell if values temporarily drop. Take a decades-long outlook.
  • Offset carry costs - Generating income from billboard leasing, cell towers, minerals, or other interim uses helps defray expenses.
  • Connect with local experts - No amount of online research replaces boots-on-the-ground experience. Find the agents who completely understand this nuanced market.
  • Be ready to move quickly - The most desirable listed properties sell fast here. Have your financing lined up in advance to capitalize on opportunities.

The Outlook for Massachusetts Land Values

Projecting where Massachusetts land prices move from here is difficult. The market faces some diverging forces:

Increasing population: Massachusetts has added over 200,000 new residents in the past decade, boosting housing demand. Higher birth rates and immigration flows continue expanding the populace. More homes needed means more demand for land.

Work location flexibility: The remote work revolution untethered more potential buyers from the office. This trend opened up possibility of living further afield from Boston/Eastern MA job centers while still commuting periodically. Western and Central Massachusetts benefit.

Development barriers: Zoning restrictions and tough entitlement processes constrain adding to the housing stock in many communities. Limited new inventory inflates values for buildable sites.

Inflation and rates: As the Fed boosts interest rates to combat inflation, the impact may gradually cool demand and price appreciation somewhat. But Massachusetts real estate has historically held up well.

On the whole, industry experts don't expect Massachusetts land prices to deflate dramatically in the coming years barring a major economic shock. But the days of 20% annual gains seem over. A pattern of mid-single digit returns appears more likely until the next growth spurt.

Is Massachusetts a Good Land Investment? The Bottom Line

There are excellent reasons why Massachusetts lands remain appealing to institutions, developers, families seeking homesites, and individual investors. Yet realizing profits and managing the risks depends heavily on your specific parcel, timeframe, and risk tolerance.

In regions with dynamic job growth and popularity with homebuyers, vacant land retains excellent long-term potential to ride the upswing. But down cycles and flat periods do transpire.

For appropriate buyers, Massachusetts land can produce outstanding returns over decades. But it requires judicious selection, local expertise, and patience navigating the state's complex development environment.

Approach Massachusetts land investing with clear eyes - understanding both the compelling reasons to buy and the potential pitfalls. Keep timeframes long, and partner with experienced locals. Land here rarely makes owners rich overnight, but carefully selected parcels build lasting value for years to come.

Frequently Asked Questions (FAQs)

Is land generally a good investment in Massachusetts?

Like most real estate, it depends on the specific location and market conditions. In growing areas near major cities or popular vacation destinations, land values tend to increase over the long run making it a potentially good investment. But other parcels may stay stagnant or decline based on local demand and zoning. Do thorough research before purchasing any property.

What returns can be expected from investing in Massachusetts land?

Returns vary greatly based on region and type of land purchased. In hot suburban housing markets near Boston, vacant lots can potentially appreciate 5-10% a year on average, sometimes more in peak years. Raw acreage may only grow 2-4% annually. There are always down years too. Aiming for longer 5-10 year hold periods helps smooth out volatility. Patience is key.

How easy is it to sell land in Massachusetts?

It’s quite illiquid relative to stocks and bonds. Average marketing time for vacant land is 1-2 years. Some parcels take even longer to sell if not in a prime location. The limited buyer pool interested in raw land makes it a more challenging sell than developed properties. Utilizing an agent experienced with land sales will help but requires realistic timing expectations.

What are property taxes like on Massachusetts land?

Property taxes vary significantly by municipality. In rural areas, taxes on vacant acreage may only be a few hundred dollars annually. Near Boston, property taxes can be $10,000+ per year on vacant plots depending on the town. Budget for ongoing taxes as part of carrying costs. Favor areas with lower tax burdens.

Can raw land generate income in Massachusetts?

There are some creative ways to offset ownership costs through interim land uses. Rural parcels may be leased out for farming, renewable energy projects like solar arrays, cell towers, billboards facing highways, or granting access easements. But in most cases, raw land itself does not create significant income apart from potential appreciation 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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