Investing in real estate can be lucrative, but only if you purchase properties that will increase in value over time. Land appraisers are often brought in to determine the value of real estate.
Many investors think that an appraisal is only needed when a home or business has already been constructed, but this isn't the case. You should bring in an experienced appraiser before you invest in unimproved land as well.
1. Obtain a Loan
Unless you have the financial resources to pay for a land purchase in cash, you will likely partner with a bank or credit union to take out a loan for the purchase price. Financial institutions don't want to loan out more than any asset is worth.
You may be required to bring in an appraiser before your loan application is approved. If you bring in an appraiser before you apply for a loan, you will be able to reduce the amount of time required to obtain an approval.
Having an appraisal in place can also help make your offer more attractive to the seller.
2. Estimate Insurance Costs
There are many costs associated with owning real estate. The cost of insuring a parcel of land can vary based on the size, purpose, and value of the property.
If you are going to make an informed decision when it comes to investing in real estate, you will need to know all of the costs that you will incur if the sale is finalized.
Insurance companies can use the appraisal documents to provide you with an estimated premium cost. You can factor the insurance cost into the monthly mortgage to determine if a specific piece of property fits into your investment plan.
3. Determine Development Potential
The purchase of a parcel of land gives an investor the opportunity to develop land according to his or her own desires. If you are planning to improve the piece of property you invest in after the purchase is complete, you will want a good understanding of the development potential of each parcel.
A land appraiser can identify any potential development roadblocks that could pose a problem in the future. Factors like accessibility, topography, and the configuration of the parcel can affect the value. These factors can also complicate the development process.
Working with an experienced land appraiser will help you identify the property that is best suited for your future development plans.