When it comes to buying land for development, there are two main types of land: raw land and land with entitlements. Raw land is undeveloped and has no approvals or permits for development, while land with entitlements has been through the process of obtaining all necessary approvals and permits for development. In this blog, we will explore why land with entitlements is worth a lot more than just raw land.
The entitlement process is a long and expensive process that can take years to complete, however, most of the time it can be done in about 9 months. The process involves obtaining approvals and permits from local and state governments, including zoning changes, environmental permits, and building permits. This process ensures that the land is suitable for the proposed development and meets all regulatory requirements.
When a developer purchases land with entitlements, they are essentially purchasing a “diamond” that has already been tested and certified as a valuable asset. This gives the developer certainty that the land can be developed according to their plans and that the investment will be worthwhile.
On the other hand, raw land is like a “crystal” that may or may not be valuable. The land acquisition professional must navigate the entitlement process to determine whether the land is worth the investment. This uncertainty makes raw land a riskier investment, and it can be challenging to secure financing for such a project.
Land with entitlements, on the other hand, has already gone through the entitlement process, demonstrating that it is worth the development price. This means that developers can secure financing more easily and with better terms than if they were buying raw land. Additionally, land with entitlements can be developed more quickly since there are no regulatory hurdles to overcome.
Given the significant investment required to navigate the entitlement process, land with entitlements is typically more expensive than raw land. However, the added cost is often worth it for developers since it provides a level of certainty and reduces risk. Furthermore, the entitlement process can add value to the land, making it more attractive to potential buyers.
In conclusion, land with entitlements is worth a lot more than just raw land due to the added value and certainty it provides. The entitlement process demonstrates that the land is suitable for development and meets all regulatory requirements. While the cost of land with entitlements may be higher, it can be a worthwhile investment for developers due to the reduced risk and easier access to financing