What is "Transitional Land?"
Transitional land is usually a parcel of 10 to 300 acres located near the edge of an existing municipality. Due to the close proximity to the municipality, transitional land provides utilities, retail stores, and other services that new residents desire.
SVN | Saunders Ralston Dantzler Real Estate sales associates David Hitchcock, ALC, CCIM, and Clay Taylor, ALC, have years of experience with transitional land.
When it comes to purchasing transitional land, Hitchcock's advice borrows from the great hockey player Wayne Gretzky; "Go where the puck isn't." Being able to anticipate population trends might allow for an investment in transitional land that could accrue a much higher value over the course of a decade. Most transitional land is purchased by investors, developers, or home builders. Investors usually hold the land from anywhere between five to ten years. Developers often begin the developing process early by putting in roads, clubhouses, and other amenities. Home builders may seek finished lots, often from a developer.
Florida Demographic Trends
“Demand for this land follows population and jobs,” Hitchcock says. Therefore, understanding demographic and economic trends is vital to the development of housing for a growing population.
According to Gary Ralston, CCIM, SIOR, a leading expert in commercial real estate data, Florida is one of the best real estate markets in the nation. According to the latest U.S. Census Bureau data, Florida’s population is now 21.3 million and grows by almost 900 people each day. Using Lakeland as the center point for analysis, there are 1.5 million people within 30 minutes; almost 4 million people within 60 minutes; and 7.5 million people within 90 minutes.
Housing growth continues to be extremely strong across the I-4 corridor. Currently, demand exceeds supply so we expect residential development of houses, townhouses, and apartments to continue to increase. Since demand exceeds supply, housing prices will also continue to grow. There is a need for almost 100 new housing units every day across the five counties that comprise the I-4 Corridor: Osceola, Lake, Polk, Orange, and Hillsborough counties.
Entitlement and Finished Lots
Before any development begins, the land needs to be “entitled;” entitled land is raw land with all the approvals (zoning, permitting, etc.) needed to begin residential development. It can one to two years or even longer to get land fully entitled. Sales contracts for transitional land almost always have a contingency clause negating the contract if the property can’t be fully entitled.
Finished lots are ready to build houses on; they are developed with roads and other amenities already in place.
How Transitional Land is Valued
Clay Taylor adds that the value of transitional land “ultimately goes to the price of the house that’s going to be built.” The purchaser adds up permitting and entitlement costs, infrastructure costs (roads, utilities, and amenities) and an expected profit then deducts the total of those costs from the expected house price. “And that’s what you can pay for the land,” he says.
A rule of thumb is that the price of an improved lot will be about 20 percent of the house’s sale price. That would mean $40,000 could be paid for an improved lot on which a house is constructed with a total price of $200,000.
Something important to keep in mind when purchasing transitional land is that Class A land tends to have higher prices. The I-4 Corridor is currently a particularly hot center for transitional land. Class A land such as land located in and around the greater Orlando or Tampa areas will have a much higher price than Class B land located in areas such as Plant City, Northeast Polk County, and Lake County. Transitional land located in Sanford, Florida currently has a price of $125,000 per acre.
While the costs for transitional lands can be high, they can be an incredibly lucrative investment opportunity if properly undertaken.
David Hitchcock, ALC, CCIM is a Senior Advisor at SVN | Saunders Ralston Dantzler Real Estate in Lakeland, Florida.
With a thirty-year veteran of the Florida Agribusiness industry, David has an excellent background in citrus and agricultural businesses. David's previous management positions include Bob Paul Citrus, Alcoma Packaging, Haines City CGA, and Helena Chemical.
David concentrates on residential development properties, the selling of finished residential subdivisions, and bulk acreage for development. His diverse background gives him extensive knowledge of properties throughout the entire State of Florida that helps provide guidance to agricultural property owners as they decide how to transition their properties to other uses.
Originally from Winter Haven, he graduated from the University of Florida (UF) on a football scholarship, and obtained a bachelor of science degree in physical education. David lettered in wrestling and football and was the Most Valuable Player and co-captain of the 1973 Gator Football Team.
Clay Taylor, ALC is a Senior Advisor at SVN | Saunders Ralston Dantzler Real Estate in Lakeland, Florida.
Clay has served 23 years with the Polk County School Board, most of which were at Lakeland High School as a teacher and defensive back coach. The last 10 years were served as the defensive coordinator, where he helped to lead the LHS team to win the State Championship six times and the “mythical” National Championship twice. He obtained a Bachelor of Science degree in food and resource economics from the University of Florida. Prior to that he attended Carson Newman College in Jefferson TN and the University of Central Florida in Orlando, FL.
He is a member of FAR (Florida Association of Realtors®), NAR (National Association of Realtors®), LAR (Lakeland Association of Realtors®) CID (Commercial & Industrial Division of LAR), and has served as treasurer of the Florida RLI Chapter since 2008. He is also a member of the Downtown Lakeland Kiwanis Club. Clay teams with David Hitchcock, Advanced ALC, CCIM; and has formed the “Taylor-Hitchcock Land Team,” which has recently won state and national awards.
Gary M. Ralston, CCIM, SIOR, SRS, CPM, CRE, CLS, CDP, CRX, FRICS, CRRP is a Managing Director & Senior Advisor at SVN | Saunders Ralston Dantzler Real Estate in Lakeland, Florida.
Gary is a recognized subject matter expert on retail and commercial properties, a successful real estate developer, investor and group investment sponsor. From the early 1990s through 2004 Gary was the president and a member of the board of directors of Commercial Net Lease Realty, Inc. (NYSE:NNN) the industry leader in single-tenant corporate net-leased real estate. During that time he guided the company’s growth from less than $15 million in real estate assets to over $1.5 billion.
Do You Have a Question for David, Clay or Gary?