How to Size Up Land in Iowa for Real Estate Development
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
This article was updated on 10/12/23.
Real estate development is a risky yet rewarding venture. What makes this project complex is that there is no one-size-fits-all solution to developments.
This challenging undertaking can be intimidating to budding real estate developers. However, beginners can succeed just as well as expert investors with the right guidance, due diligence, and planning.
Investors across the country are looking at land for sale in Iowa for their next project. Even developers with little experience can reap rewards from building in this state.
Let's take a closer look at how buying land for sale in Iowa can lead to profitable commercial real estate developments.
What Is Iowa Known For?
Iowa's bustling agricultural industry makes it the third most productive state in the country. This exceptional performance ranks the state right after California and Texas. Iowa's agricultural system is up to par with states that have at least ten times the population of the Hawkeye State.
Corn and pork are the primary staples of the industry, top producers for both commodities. There are more hogs than people in the state. Even more astounding is that its chicken population is at least twice as large as the hog population.
The state's agricultural success attracts commercial land investors from all over the nation. Opportunities to contribute to the industry are both appealing and beneficial.
Visitors and residents alike have praised the state's balance of small-town and urban life. It's no wonder "Iowa nice" is a common term in the area.
What's the Average Cost Per Acre of Land for Sale in Iowa?
Each of Iowa's 99 counties' average acre costs vary. Prices reflect each area's land market. Farmers and landowners in Iowa shared what factors influenced their county's land market:
- Favorable interest rates;
- Limited land supply;
- Recent commodity prices;
- Strong demand;
- COVID and government payments;
- Lower commodity prices; and
- Weather, political, and economic uncertainty.
These aspects cause price differences between counties:
- Iowa Overall Average Cost: $7,961 per acre;
- Wayne County: $4,733 per acre;
- Montgomery County:$6,955 per acre;
- O'Brien County: $9,583 per acre;
- Jasper County: $7,957 per acre;
- Grundy County: $10,049 per acre;
- Davis County: $4,709 per acre.
Potential Iowa estate investors should look into the land quality in these counties. Sizing up prospective Iowa land will take time but will save you trouble in the long run.
#1 – Discern the Land's Economic Potential
Iowa's agricultural industry significantly contributes to its economy. Therefore, farmland for sale in Iowa can offer advantageous economic potential.
The state has the right amount of rainfall and sunshine throughout the seasons most years. Its fertile soil makes economic advantage possible.
Here is how much each agricultural commodity contributes to the state in a single year:
- Corn: $8 billion;
- Hogs: $7 billion;
- Soybeans: $4 billion;
- Cattle: $4 billion; and
- Dairy: $1 billion.
However, non-farming industries are blooming in Iowa as well. Manufacturing, renewable energy, insurance, and banking make up most of the state's current economy.
Farmland is not the only kind of land with potential. Investors can look into setting up shop closer to suburban and urban areas.
Having an idea of the kind of return you'd want will help you decide what kind of economic potential to look for.
#2 – Research Zoning & Other Land Restrictions
Zoning and land restrictions can encourage or deter you from purchasing a land lot. This is why deciding what you'd like to do with your acreage before searching is critical.
For example, a building built in a suburban area will have different zoning regulations than in an agricultural area. Typically, the state allows more leeway with farming-related buildings. However, ambiguities in Iowa zoning laws can make discerning what's appropriate confusing.
Additionally, zoning and land regulations vary across counties.
#3 – Research Water Rights & Utility Costs
Landowners can create structures to move water drainage towards their farms. An auditor will have to approve the construction as the water drainage may cross through another person's property.
Understandably, this can cause conflict between neighbors feeding off of the same water drainage.
Water rights are laws that determine where surrounding water belongs. The state delegates certain amounts to each relevant usage. Iowa employs a modified riparian plan that conserves water and distributes it fairly.
Check for what water permits you'd need for your potential lot.
Utility costs are a major consideration as well:
- Average Commercial Monthly Electricity Bill: $395.09;
- Average Residential Monthly Electricity Bill: $94;
- Average Utility Cost for Farms: $9,748;
- Water and Sewer Connection Fees;
- Well Installation Costs;
- Landscaping Costs;
- Road Construction Costs;
- Permit Fees;
- Impact Fees.
Other necessary aspects to check for include:
- Septic System Type;
- Boundaries;
- Road Access;
- Wildlife Consideration.
Prior to delving into monthly costs of potential acreage, it's also in investors' best interests to pay for environmental assessments.
#4 – Research Other Environmental Considerations
Environmental assessments are important to the state, but it's also vital for a new landowner's confidence. These check-ups will ensure that your land can handle its intended use. Additionally, it can save you money in the long run by weeding out any contamination before it starts.
Phased Environmental Site Assessments go through four stages when auditing a site:
- Phase 1: Check for chemical residue, asbestos, mold, lead-based paint, and other contaminants. Potential contamination sightings bring the assessment to the next phase.
- Phase 2: Investigates groundwater, building materials, and soil for contamination.
- Phase 3: Determines how much the contamination impacts the land.
- Phase 4: Cleaning the property and ridding it of further contamination.
Taking care of your land for sale in Iowa includes starting off on a clean slate. Contamination can bring down hard work when landowners are not careful.
The natural environment around the potential lot can become an issue. Research and ask around about what environmental problems have occurred in the past. Events like floods, freezing weather, and erosion can damage the property.
The quality of the land's resources should also be considered, especially if you're looking to farm. The Environmental Assessment can check for contaminants in soil and water. You can further look into soil and water quality by hiring help from additional experts.
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