How to Invest in Delaware Land?

As the first state to ratify the US Constitution back in the 18th century, Delaware enjoys a rich history of opportunity dating back to its colonial foundations centered around agriculture and trade along the Atlantic coast and Delaware River Basin. That spirit of prosperity continues today, with Delaware population and business growth data from the Census Bureau showing over 5% increases annually as people migrate seeking lower taxes and affordable living. Yet Maryland developers have already caught on, snatching up large Delaware land tracts for residential builds best positioned to meet this surging housing demand from new state residents and expanding retirement community segments. 

This leaves aspiring real estate investors wondering if profitable entry points still exist to acquire raw land for appreciation plays. The insights in this guide examine intelligent investment strategies for positioning land holdings around Delaware for suitable commercial, agricultural or managed timber forestry ventures catering to both evolving in-state consumer behaviors and also broader east coast markets reachable via the state's centralized location.

Overview of the Delaware Real Estate Market

Before diving into the ins and outs of investing specifically in Delaware land, it helps to understand the broader real estate market in The First State. Home prices in Delaware have seen healthy growth over the past decade, with the median sales price statewide rising over 60% since 2011 to $290,000 as of 2021. Delaware also boasts one of the hottest job markets in the U.S., with plentiful employment opportunities drawing new residents. This influx of workers feeds the demand for housing.

While the market remains competitive, Delaware still offers relatively affordable home prices compared to neighboring states like Maryland and Pennsylvania. Areas within commuting distance of major employers tend to see the highest demand. Other factors investors should consider include:

• Low property taxes: Delaware real estate owners pay some of the lowest effective property tax rates in the country.
• Business-friendly laws: Delaware is known for its business and tax advantages, making it appealing for companies large and small. More businesses mean more jobs and people.
• Tourism: Popular beach towns like Rehoboth and Dewey rely heavily on summertime tourists and second homeowners, causing real estate markets to fluctuate seasonally.

Where to Buy Vacant Land in Delaware

When it comes to investing in raw, undeveloped land in Delaware, some locations hold more potential than others. Investors should focus their land buying efforts on areas poised for population and job growth as well as those inside and around established suburbs and cities.

Specifically, here are some top Delaware cities and towns to target when investing in vacant residential or commercially zoned land:

Wilmington Area

As the largest city in Delaware, Wilmington offers a range of urban land investment opportunities with its mix of established neighborhoods alongside up-and-coming redevelopment zones. Areas northeast of the city also provide promising sites for future residential growth. Investors should specifically look at:

• Development sites within Wilmington or in close proximity along major transportation routes
• Parcels zoned for higher density housing within commuting distance to Philadelphia
• Land earmarked for commercial/industrial development per Wilmington's comprehensive development plan

Newark

Located in New Castle County just west of Wilmington, the city of Newark provides access to University of Delaware as well as proximity to several major employers. With its blend of historic homes alongside new construction, Newark provides solid prospects. Target areas include:

• Parcels allowing student housing development near the university
• Residential building lots within Newark's designated growth zones
• Land adjacent to mixed-use/commercial developments on key corridors

Dover

As the capital and second largest city in Delaware, Dover offers a more affordable alternative to Wilmington-area housing while still providing convenient access to jobs, dining and entertainment. Investors should focus on plots allowing residential development, especially in areas like:

• New housing communities off Route 1 by State Route 8
• Parcels near Dover Mall retail along with North Dupont Highway
• Sites near Dover International Speedway and entertainment attractions

Southern Delaware Beaches

While the resort towns along the southern Delaware shoreline see extreme seasonal swings, this region provides strong demand for vacation homes and investment properties that can generate rental income. Land investors should zero-in on parcels allowing higher density development in areas such as:

• Coastal towns like Rehoboth Beach, Dewey Beach and Bethany Beach
• Inland neighborhoods providing easy access to beaches for second homeowners
• Plots adjacent to existing retail and vacation rental communities

Evaluating Land Investment Opportunities

When analyzing a specific land investment opportunity in Delaware, there are several key factors savvy investors consider before purchasing:

Zoning Classification and Allowable Uses

Carefully verify what types of future development are permitted based on current zoning rules. This includes categories like residential, commercial, industrial or mixed use. Also confirm details like maximum building height, required lot sizes and allowable density for housing.

Access to Utilities

Land with existing electric, water, sewer and gas service already in place holds much more potential for profitable development vs. plots still requiring infrastructure upgrades after purchase.

Transportation Accessibility

Properties near major roads and highways typically allow for quicker development and higher value appreciation over time. Parcels deeper into rural areas generally limit options unless part of a proposed housing community.

Surrounding Property Uses

The overall neighborhood and what’s built on adjoining lots provides clues into an area’s growth cycle. While open land signals room for expansion, run down or industrial neighbors can hamper value. Thriving residential markets signal stable demand from homeowners.

Recent Comparable Sales Data

Look at what similar vacant land parcels have sold for recently to gauge the upper threshold for valuation. Raw land typically sells for $5,000 to $50,000 per acre depending on zone classification and location.

Financing Your Delaware Land Purchase

Finding the capital to purchase investment land often requires some creativity from individual real estate investors. Beyond traditional bank financing that can prove tricky for raw land buys, other options include:

• Hard money loans based on the land value rather than you/your company’s financials
• Crowdfunding via private lenders willing to back your project
• Partnerships with co-investors who fund a portion of the overall purchase and development costs
• Seller financing where the property owner carries part of the overall sale price with installments over time rather than a single lump payment

Each approach has its own pros and cons. Make sure to consult an accountant and real estate attorney to evaluate the optimal strategy based on factors like:

• Your personal financial resources and credit history
• How soon you need to take ownership and start development planning
• The timeline for eventual sale or lease to generate investment returns

Key Steps to Start Investing in Delaware Land

If you feel ready to add vacant land investment to your broader Delaware real estate portfolio, follow these steps to start building your land assets successfully:

Set Clear Investment Goals

Get specific on what you want to accomplish. This includes preferred locations, ideal lot sizes, zoning designations, budget limits, and projected timelines from acquisition to development to selling or leasing. Establishing defined parameters for a successful deal makes it easier to pursue promising prospects while avoiding bad fits.

Line Up Representation and Allies

Connect with a knowledgeable local real estate agent who specializes in land transactions. They can feed you leads on discounted sites and guide negotiations. Also build relationships with land developers, contractors, permitting officials and lenders early so you have resources to call on when you’re ready to start your project.

Allow Time to Wait for the Right Deal

Jumping at the first available parcel can often lead to disappointment. Identify multiple appealing target areas and remain patient searching for discounted sites with inherent upside tied to the zoning and surrounding growth potential. Leveraging relationships with land listing agents can help shake loose off-market opportunities at below full retail prices.

Perform Due Diligence Before Committing

Thoroughly evaluate zoning codes, utility availability, terroir conditions, flood zone status, easements and other factors that dictate what you can build before advancing too far with a site. Also assess when surrounding lots may also get scooped up. While paying a premium for prime parcels often makes sense, don’t overpay based on emotions or get pressured into a questionable purchase even if the opportunity seems scarce. More deals always surface eventually.

Don’t Overleverage Your Financial Resources

Banks often lend up to 80-90% of a site's market value. But securing bank land financing still typically requires good credit, existing equity, and meeting other strict qualifying hurdles. Recognize vacant land itself generates no immediate cash flow, so keep loan amounts within reason relative to your existing income and reserves.

Why Companies Like Land Boss Provide a Worthwhile Land Buying/Selling Option

For Delaware land owners who prefer not to navigate the complexities of marketing and selling their undeveloped properties independently, experienced companies like Land Boss provide an alternative exit option to consider. While some view direct purchase offers at below full retail pricing as "low-balling", Land Boss adheres to honest business practices and reasonable valuation methods.

Sellers benefit from Land Boss's financial capability to buy land with cash and handle all closing costs/fees for streamlined transactions. And with an existing portfolio of sites acquired across multiple states, Land Boss commits to each project for the long haul. They don't resell newly-acquired parcels via quick flips. Land Boss ultimately works toward win-win deals allowing owners an easier exit strategy while growing the company’s broader land assets.

Position Yourself for Delaware Land Investment Success

While seeking discounted Delaware land buys requires dedication and diligence, taking the right steps to finance, research and evaluate opportunities can help set the stage for rewarding real estate returns over time. Having a clearly defined investment strategy focused on growth-oriented locations also provides confidence for taking action when the ideal parcel becomes available at the right price.

Frequently Asked Questions (FAQs)

What types of land are best for investment in Delaware? 

The most promising investment land in Delaware consists of parcels zoned for residential or commercial development located near major employment hubs and infrastructure. Vacant lots in established communities and high-growth areas hold the greatest potential.

How much does land typically cost to buy in Delaware? 

Land prices vary greatly based on location and allowable uses. In more rural areas, prices may range from $5,000 - $15,000 per acre. For land zoned for housing development closer to cities, prices often run from $20,000 - $60,000+ per acre.

What risks should I evaluate before buying Delaware land as an investment? 

Key investment risks to assess include restrictive zoning/permitting hurdles, extended timelines to realize returns, market fluctuations and downturns, development costs and financing challenges, potential environmental issues, and overpaying above the true market value.

What financing options exist for purchasing investment land in Delaware? 

Beyond traditional mortgages, options include hard money loans, private financing, crowdfunding partnerships, seller financing, and conservatively using credit cards or personal loans/lines of credit. Each approach has pros and cons to weigh with your advisors.

How long does it usually take to earn returns from Delaware land investments? 

While market conditions vary, plan for longer time horizons from acquisition to sale or lease. Budget 2-5 years to navigate permitting, development, construction, marketing, and securing buyer/tenants for income-generating commercial sites or housing communities. Ensure you have adequate resources and patience.

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