Is New Jersey Land a Good Investment?

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Is New Jersey Land a Good Investment?
By

Bart Waldon

Buying land to build or flip for a profit is the American dream. But in a hot real estate market like New Jersey, does vacant land really pencil out as a solid investment? As someone who has flipped properties in the Garden State for over a decade, we get asked this question a lot by folks looking to break into the market. The answer? It depends. Land can definitely drive returns if you buy smart, but there are also plenty of money pits out there for novice investors. Here’s our honest take as an experienced, local land company on the pluses and minuses of putting your money into New Jersey land.

Scoping Out the Local Land Market

They don’t call it the “Gold Coast” for nothing - New Jersey offers one of the nation’s most robust real estate markets. Land values vary wildly though based on location. Up north near NYC, you’ll pay a premium for vacant property in commuter counties like Bergen and Hudson. Transportation hubs like Newark and Jersey City also trade at higher per acre prices. Places like Trenton or Atlantic City run far cheaper in comparison. And of course, if you can snag a commercial parcel along the Jersey Shore, it usually comes with a built-in jackpot.

In terms of sales prices, northern Jersey saw median home values hit $535K in many suburbs last year. Central Jersey settled in the low $300Ks, while southern rural areas dropped closer to $250K. For undeveloped land, location is even more critical. Expect to shell out anywhere from $50K an acre for marginal sites to over $1 million+ for prime parcels near major highways and metros.

As for the strength of the market, New Jersey remains a seller’s haven. Limited land supply against high demand pushes up prices. Bidding wars in the hottest neighborhoods are common. On average, homes sell for 98% of list price. But one warning - the market here is prone to overheating then crashing during financial downturns. Tread carefully if we’re mid-bubble.

Key Factors that Impact Land Values

While dirt is dirt, the value of a land parcel depends heavily on several key factors:

Development Potential - If you can build on it, the sky's the limit. Land with utility access, permissible zoning density, and appropriate road frontage carries major premiums. Sites only suitable for a single house won't bring acreage prices. Maximizing value depends on maximizing buildable square footage.

Accessibility - Land deep in the boonies may score on price, but good luck finding buyers later. Parcels need highway, transit, or Main St frontage. The more cars that drive past a site, the more valuable the dirt becomes. Corner lots also rate higher than buried mid-blocks.

Nearby Amenities - People pay more to live and work closer to beaches, ski resorts, parks, nightlife districts, and other area attractions. Seek out land on the advantageous side of natural and man-made amenities. Waterfront parcels in particular pull huge sale prices.

Intended Use - Growing corn vs. building townhomes produces vastly different land values. Sites suited for commercial development with proper utilities and transport access bring higher sale prices than those best for farming.

Local Economy - Healthy, growing suburbs see greater demand for vacant land than stagnant rural counties. Look for job and wage growth and low unemployment to indicate areas primed for appreciation.

Regulations - Local zoning, density limits, and permitting processes directly impact costs and timelines. More development-friendly codes equal higher land values. Conservative regimes hamper profit potential.

Evaluating the Risks of Land Investing

Before liquidating your 401K to buy that 100 acre parcel, consider these common pitfalls that can leave buyers underwater on land deals:

Market Fluctuations - Real estate investing offers little certainty, and land values bounce around based on broader economic forces. Entering before a bubble bursts can sink deals. Stay cautious when markets look frothy.

High Taxes - New Jersey levies some of the steepest property tax rates in the U.S., eating into returns. Make sure to budget for yearly tax bills which keep rising.

Long Hold Times - Undeveloped land takes longer to sell than existing homes, sometimes upwards of two years. Be prepared to wait in down markets.

Zoning Changes - Local governments might reduce allowable density despite your existing plans, severely hampering value. This regulatory risk is hard to predict.

Legal Issues - Mistakes like inaccurate surveys and undisclosed easements can limit development. Vet purchases thoroughly to avoid nasty surprises.

Remediation Costs - Former industrial sites often require extensive environmental cleanups prior to securing permits. This can sink deals if contamination is significant.

Low Demand - Even cheap land will sit if no one wants it. Remoteness or other factors can limit appeal. Buy desirability, not just affordability.

Smart Tactics for Purchasing Land

If you decide the potential rewards outweigh the risks, employ these tips when buying New Jersey land:

  • Seek discounted sites like bank-owned foreclosures to secure better entry prices.
  • Inspect parcels thoroughly yourself to catch any red flags that might limit building.
  • Research local zoning codes and density limits before purchasing to understand what’s allowed.
  • Hire good professionals to survey boundaries and provide title insurance to protect your interests.
  • Consult land use attorneys to navigate ordinances and permitting hurdles.
  • Build detailed cost models with conservative timelines and revenue projections.Plan for hiccups.
  • Target properties with flexibility - commercial and residential approved uses provide options.
  • Focus your search near high-traffic areas and expanding suburbs with consistent housing demand.
  • If undertaking a major project, partner with experienced developers rather than going it alone.

Selling Land to a Company - The Simple Exit Strategy

Finding the perfect parcel is step one. Figuring out how to profitably sell it later for top dollar poses another headache altogether. After holding land for years, many sellers decide they’d rather exit the asset than build themselves. Companies like the one I run offer a straightforward solution.

Working with experienced land buyers provides multiple advantages compared to selling yourself:

  • Cash Offers - Company buyers pay all cash and can close quickly, compared to financing contingencies.
  • As-Is Condition - Sellers avoid extensive prep or rezoning efforts to ready land for building.
  • Quick Closing - Companies can settle in weeks, whereas land takes 1-2 years to sell traditionally.
  • No Marketing - Owners avoid advertising costs and effort, as the buyer markets and develops the site.
  • Risk Transfer - By selling to a company, all construction and market unknowns pass from seller to buyer.
  • Motivated Buyer - Unlike house hunters who can be flaky, companies have the experience to close deals smoothly.

The trade-off is usually a lower price than maximum property value. But many find the speed and ease of closing with a company outweighs leaving some profit on the table. For the right seller, it provides an optimal exit.

The Bottom Line - Tread Carefully But Opportunity Awaits

In closing, vacant land represents both potential reward and risk for real estate investors in the Garden State. While profits can grow under the right conditions, land deals also face significant hazards. Avoid jumping in blindly. But for savvy buyers and sellers who understand local market dynamics, New Jersey land offers fertile ground to sow investment dollars if you move wisely. Do your homework, find a great parcel, then get ready to start building wealth one acre at a time. Just don't quit your day job until you've got some successful deals under your belt - there's no sure bets with dirt.

Frequently Asked Questions (FAQs)

What areas of New Jersey tend to see the highest land values?

Land prices vary greatly in New Jersey based on location and development potential. Northern counties near New York City like Bergen and Hudson often top the list thanks to strong housing demand. Other hotspots include transportation hubs like Newark and Jersey City, as well as coastal areas along the Jersey Shore. Proximity to amenities and urban centers drives prices.

How much does vacant land cost per acre in New Jersey?

Land prices range dramatically based on intended use, development potential, and area desirability. In strong markets, prices can exceed $1 million per acre. In rural locations with lower demand, per acre cost may only be $5,000-$10,000. On average, expect to pay $50,000-$500,000 per acre depending on the location and attributes.

What risks do land investors face in New Jersey?

Investing in vacant land poses risks including market volatility, long hold times, zoning changes, environmental issues, and low buyer demand in some areas. New Jersey also levies high property taxes that eat into returns. Doing thorough due diligence before purchasing is critical.

Should I sell my New Jersey land myself or to a company?

Selling land yourself allows for potentially higher profits but involves major time and effort for marketing and negotiations. Companies like Land Boss purchase land directly, providing a fast exit. While you take a discount selling to a company, it removes the sales burdens.

How can I determine a good price for my New Jersey land?

Examining recent land sales of comparable parcels in the same locale provides a baseline for pricing. Adjust up or down based on differences like lot size, road frontage, and utility access. Consult real estate agents familiar with the area to help set an appropriate asking price as well.

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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