How much money you will need to shell out depends on the location that you’re looking to buy. An acre of land in San Francisco will not be the same as an acre of land in Topeka. These factors below are what typically decide how much an acre is worth:
- Location: Let’s face it. Real estate is all about location. An acre of land in Brooklyn will cost you around $23 million. An acre of land in Kansas might cost $5,000 or less in certain remote parts.
- Supply and Demand: This goes hand in hand with location, but for different reasons. If you are looking for farmland that’s rich in nutrients, you will have to pay a higher price for an area like Napa Valley. Places like that are limited, which means more people are going to want to work with them.
- Surrounding Amenities: Areas that are known for having parks or major attractions tend to carry a premium price.
- Population: For the most part, people do not want to live in an area where they stay miles away from everyone around them. Rural areas often don’t have much infrastructure or may require citizens to drive a long way for basic staples. This is why urban areas tend to be pricier.
- Local Economy: One of the reasons why New York City’s real estate is so popular is because it’s home to a huge economy. When you have lots of job opportunities and excellent social mobility, people are bound to want a slice of the action. This, in turn, increases land value.
- Local Liabilities: Much like amenities can make a place more popular, local liabilities also can play a role. Things like having toxic chemicals in the soil, being in a floodplain, or having an area close to high crime rates can drag the value of your acreage down.
- Wyoming: $1,581 / acre
- New Mexico: $1,983 / acre
- Nevada: $2,198 / acre
- Montana: $2,307 / acre
- South Dakota: $2,365 / acre
- North Dakota: $2,552 / acre
- Nebraska: $2,976 / acre
- New Jersey: $198,046 / acre
- Rhode Island: $133,908 / acre
- Connecticut: $131,616 / acre
- Massachusetts: $103,883 / acre
- Delaware: $58,605 / acre
- New York: $44,826 / acre
- California: $41,924 / acre
Land is much like any other investment in the sense that it generally increases in value while still having the chance of suddenly dropping in value. Generally speaking, buying an acre of land is viewed as a smart real estate investment—especially if you decide to build on top of it.
However, there are several cases where your land can lose a considerable portion (or even all) of its value, whether it's a small quarter-acre plot or a large farm. It is historically rare, but it has happened in the past. Some of the best examples include:
- Detroit: The problems started when American auto manufacturing jobs died out. Ultra-high crime rates drove out many families, many of whom left the city to seek out better opportunities elsewhere. As a result of the crime, lack of jobs, and urban blight, Detroit’s land can be borderline free in some areas of the city. While each acre of land in Detroit lost a lot of value, the homes sitting on the land lost even more.
- Love Canal: Once known as a friendly blue-collar town, Love Canal rose to fame after mothers began noticing a spectacularly high rate of congenital disabilities in children. Later, it came to light that the entire town was built on an extremely lethal toxic waste dump. The whole town was demolished and evacuated as a result of the scandal.
- The Salton Sea: The Salton Sea was known for being a major resort town near a desert lake. Unfortunately, the lake dried up. When it did, people no longer wanted to visit the area. Hoteliers abandoned the area, unable to sell their venues to anyone.
- Elk Lick: This Ohio ghost town was once thriving. Unfortunately, a flood annihilated the town, and it was never rebuilt.
What is notable about these stories is that some investments could have been prevented if people watched out for warning signs. For example, soil testing would have alerted investors to Love Canal’s problems. Meanwhile, looking at the overall map of the Salton Sea would have shown investors that the lake was in trouble.
If you choose to buy land, make sure that you’re not buying acreage in an area that is deemed "lost land” as it is too dangerous or useless to be profitable without a serious overhaul. Your wallet will thank you for watching out for your best interest!