Why should real estate investors care about soil? Well, as the hit Jordan Davis and Luke Bryan song goes, “You can’t buy happiness/But you can buy dirt”.
When I first joined Toastmasters, there was another new member who was a geotechnical engineer. Maybe you’re smarter than I was and you already know what that is, but at the time, I did not.
New members of the organization are tasked with giving an introduction speech, meant to be “all about them”. Naturally, this gentleman’s speech was a lengthy introduction to what a geotechnical engineer is and why we need them. This budding public speaker came alive and completely forgot his nervousness when he was talking about soil types and how key they are to ensuring quality bridges for us to safely drive on. I was left with a deep appreciation for how important soil engineers are to our daily lives and why we need people who live and breathe dirt.
For example, we had a client who owned a nice tract of fairly level farmland. It had road frontage on 3 sides and was located near a major town.
It may or may not have been located on a road that had the words “Gun Club” in its name.
The property seemed like a perfect location to subdivide large lots to sell. Who wouldn’t want to live on Gun Club Road? You would never have to remind people where you live.
However, the property had soils that failed the percolation tests. Super hard, clay-based soil made the area unable to percolate appropriately, and it was deemed unsuitable for development due to the prohibitive costs of the specialized septic system that was needed.
Why should real estate investors care about soil?
1. If you intend to own, build, develop, or renovate real estate, knowing what lies beneath the ground helps to anticipate the cost to do so.
For example, let’s say that you purchase a property that needs a much larger parking lot. You see there is plenty of area to install more parking. You even check the setbacks, though parking can usually be within the setbacks. You like what you see, so you go ahead and close on the property. Later, you discover that the area you need to excavate is full of rock under just a thin layer of soil. Correspondingly, your costs end up thicker than the bedrock.
2. If you invest in farmland, or have an interest in commodity investing, knowing basic soil information is helpful to find profitable investments.
First: Understand the Geology Underneath the Soil
Underneath the layer of soil is what’s known as “bedrock”, which is made up of limestone, shale, and similar rock formations. The depth of soil before encountering rock can vary, but in the Northeast is typically several feet.
The DCNR provides a mapping of that geology. The below map shows an overview of the depth of soil before bedrock in the U.S. The red denotes 0-10 meters, and the white is 50 meters or more. Note that areas of the Midwest have very deep soils, which is a reflection of the rich soils for farmland that the Midwest is known for.
Did you know that Iowa has some of the most fertile soil in the U.S.? This is partly because the Midwest has a deep base of high-quality soils deposited in the basin areas shown above.
Second: Understand Basic Soil Types
Types of Soil and Their Impact
Clay: Clay soils are known for their high water retention and plasticity. While they may seem ideal for supporting heavy structures, clay can expand and contract with moisture changes, leading to foundation issues, cracking, and other structural problems.
Silt: Silt soils are finer than sand and can retain water for a long time, which may lead to poor drainage. Properties built on silt soils may experience shifting and settlement, especially if the soil becomes oversaturated.
Sand: Sandy soils drain well but do not retain moisture or nutrients effectively. This can be both an advantage and a disadvantage, depending on the type of construction. Sandy soils are typically more stable than clay, making them suitable for foundations, but they may require additional stabilization measures to prevent damage from erosion.
Loam: Loam is considered ideal for construction because it is a balanced mixture of sand, silt, and clay. It has good drainage properties while still providing enough support for most structures.
The Best Soils for Farming
Any farmer will tell you that the best type of soil is the one that yields a plentiful harvest with the least amount of tillage and fertilizer needed. But does that best type of soil exist? Both scientists and growers agree that loam is the easiest to work with, yet also the most fertile. Because of its precisely balanced composition of 40% silt, 40% sand, and 20% clay, loamy soil maximizes the positive effects while utilizing each component’s most outstanding qualities.
Within the agricultural production regions of the U.S., some states stand out in production, mainly because of their soil types.
The top 10 agriculture-producing states are:
- California, $58 billion
- Iowa, $44.7 billion
- Nebraska, $31.6 billion
- Texas, $29.7 billion
- Illinois, $27.9 billion
- Minnesota, $26 billion
- Kansas, $23.5 billion
- Indiana, $18.3 billion
- North Carolina, $16.8 billion
- Wisconsin, $16.6 billion
While PA does not follow in rankings by dollar amount until #20, our state still produces a significant amount of crops – especially within Central PA. Maryland trails behind at #36.
Third: Understand Soil Testing and Analysis
Before purchasing a property, especially for development purposes, it is crucial to conduct a thorough soil analysis. Soil tests will reveal the composition, bearing capacity, and potential issues such as contamination or instability.
If you want to look up a soil type specific to a property, this page from the USDA will allow you to search for specific locations: https://websoilsurvey.nrcs.usda.gov/app/
Geotechnical Surveys: While online sites like the previous one can provide you with significant data, on-site testing is still needed for specific planning. A geotechnical survey involves drilling boreholes and taking soil samples at various depths. These samples are then analyzed to determine the soil’s physical and chemical properties. The results help engineers design appropriate foundations and other structural elements.
Environmental Testing: In some cases, particularly in urban or industrial areas, soil may be contaminated with hazardous substances like heavy metals or chemicals. Environmental testing is necessary to identify any potential contamination that could pose health risks or affect the development process.
Percolation Tests: For properties that will rely on septic systems, percolation tests are used to determine how well the soil absorbs water. Poor percolation rates can necessitate expensive drainage systems, or make the property totally unsuitable for development.
Soil-Related Risks and Mitigation
Understanding soil risks is essential for early mitigation of potential problems that could arise during or after construction. Several key risks to look out for include:
Erosion: Soil erosion can occur due to wind, water, or human activity, leading to loss of soil stability and support. Erosion control measures, such as retaining walls, vegetation, or geotextiles, may be necessary to protect the property.
Expansive Soil: Soils that expand and contract with moisture changes can cause severe damage to foundations and structures. Mitigation strategies include soil stabilization, moisture control systems, and the use of deep foundations that reach more stable layers.
Sinkholes: Certain types of soil, particularly those rich in limestone, are prone to sinkhole formation. Sinkholes can cause catastrophic damage and are often difficult to predict. Investing in thorough geological surveys and insurance can help to mitigate this risk.
- Certain areas throughout Central PA and Northern Maryland have been shown to exhibit sinkholes. While these generally are not large enough to swallow a whole house like the headline-making stories coming out of Florida, they are still able to cause massive damage and should be taken seriously.
Legal and Regulatory Considerations
Real estate investors must also be aware of the legal and regulatory implications related to soil. Local and state regulations often dictate what kind of construction can take place on certain types of soil, particularly in areas that are prone to landslides, flooding, or other natural disasters.
Zoning Laws: Zoning laws may restrict development in areas with known soil issues. It’s important to consult with local planning authorities to understand any restrictions or requirements for soil testing and mitigation.
- Some municipalities will also restrict development in areas with certain soil qualities. We have seen instances where solar development is permitted on agricultural land, but only if it’s not located on higher-quality soils.
Environmental Regulations: If soil contamination is discovered, there may be strict regulations regarding its cleanup. The cost of remediation can be substantial and may impact the financial viability of a project.
- Contamination trapped in soil is a dirty topic (pun completely intended) and should be approached very carefully, as the property owner is on the hook for this cost.
Building Codes: Building codes often include specific requirements related to soil stability and foundation design. Ensuring that a project complies with these codes is crucial to avoid costly fines or, worse, unsafe conditions.
Conclusion
Why should real estate investors care about soil? Whether you’re developing land or purchasing an existing property, a solid grasp of soil considerations can lead to more successful, stable, and physically safe real estate investments.
Working with an advisor can ensure that the many facets of real estate that may lie hidden are brought to light and handled correctly before they become a costly mistake for you. Call our team for a comprehensive analysis of your investment strategy to safeguard against potential issues!
Sources
https://eos.com/blog/types-of-soil
https://daac.ornl.gov/SOILS/guides/Global_Soil_Regolith_Sediment.html
https://www.gis.dcnr.state.pa.us/pageode
