When you buy land, how much do you care about “usable acreage” vs total acreage?

Question

I’ve been thinking about this a lot while looking at different vacant land deals.

A listing might say 10 acres, 20 acres, 40 acres, etc., but that number doesn’t necessarily tell you how much of the property actually works for what you want to do with it.

Once you start layering in things like floodplain, wetlands, drainage, slope, setbacks, easements, access, septic limitations, or zoning requirements, the realistic usable area can look pretty different from the advertised acreage.

And none of those things automatically make a property a bad deal. Sometimes they barely matter depending on the intended use.

But it makes me wonder how other land investors think about it.

When you’re evaluating acreage, do you have a minimum percentage of the property that needs to be realistically usable before you walk away?

Or is it completely dependent on price and what you plan to do with the land?

Would love to hear how others approach it.

Michael K Gallagher · Answer

not generally that simple, there are likely guidelines, that are fed from the end use case, and what the building is going to be.  Generally can't get an accurate idea of the deal without first knowing how you plan to use the dirt, and the value that produces.

Amanda Riggs · Answer

@Jay Hinrichs

That makes a lot of sense. So you’re really underwriting the property based on net development yield rather than just gross acreage. That’s actually something I’ve been looking at closely - identifying mapped constraints early enough to get a better picture of how much of a parcel may realistically contribute to development before going deeper into engineering/site planning.

Do you typically estimate that lot yield before you have a preliminary site plan, or does that usually come later in your process?

Michael Boisvenue · Answer

each deal is different on that front.

Jay Hinrichs · Answer

what we normally do is pay for a certain lot yeild.. so if wetlands  roads  parks storm water ponds etc eat into land for lots the purchase price is adjusted accordingly