Is there a rule of thumb for how far out from a city limit a land bank parcel stops making sense?

Question

I keep seeing acreage listings 8 to 15 miles outside a mid-size metro, around 180,000 people, growing maybe 2% a year. Prices range from $3,400 an acre at 8 miles to $1,100 an acre at 14 miles. The growth pattern looks like it's been moving roughly 1 mile outward every 4 years based on where development actually landed in the last decade. So at that pace the 14-mile parcels are 24 or more years from being touched, which feels insane to hold. But I don't know if I'm reading growth rate right or if there's some other way people figure out the outer edge of where it's still rational to buy.

hannah_west29 · Answer

24 years of carry cost on $1,100 land needs a serious appreciation rate to pencil. What's the property tax burden per acre annually out there?

yusuf_demir · Answer

Your 1 mile per 4 years is probably close but it assumes linear sprawl, and mid-size metros rarely grow evenly in all directions. One side usually has a highway corridor or employer anchor pulling growth faster while the opposite edge stalls. The rational outer limit shifts completely depending on which quadrant of that city you're looking at.

At $1,100 an acre and 24-plus years, the math only works if you're paying cash and carrying costs are near zero, like ag-exempt land with a grazing tenant keeping taxes under $10 an acre annually. I've seen that in central Texas exurbs and it changes the whole hold calculus.

Is there a rule of thumb for how far out from a city limit a land bank parcel stops making sense?

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