Land investment is something you can passively invest in and still get some benefits. This kind of investment is one of the most frequently overlooked because don’t know what to do to make money with land.
Continue to read on to understand the benefits of investing in lands, how to invest in lands, why land investment is a good idea.
Let’s talk about what land is. A raw land refers to undeveloped land without a property built on it. Owning land can provide substantial benefits for you if you know what you are doing with it.
Table of Contents
Benefits of Land Investing
More Passive Than Other Real Estate Revenue
Land investing does not necessarily need much of your involvement compared to other types of investment. It’s generally a passive investment.
Inexpensive Compared To Other Real Estate Investments
Land investing is buying smaller pieces of the area of land with cash alone. Thus, the property taxes, insurances, or maintenance costs are not too high.
Lower Competition
Land investing has low competition, and you are most likely to get a good deal easier. People with limited cash can buy and build later on the land.
Potential For Home Run Deals
The value of the land may increase slowly, but land prices can hike within 24 hours. Others are buying lands with the thought that their land will be included in the government’s rezoning process.
Thus, if the land is included in the government’s rezoning process, the land value increases. It can also be sold to high-end developers.
Land investing should be thought very well, and you should have an idea of your investment’s ins and outs. Many challenges land investing brings. That is why you have to be careful and watch out for a couple of considerations before investing in lands.
Few Things to Consider Before Land Investing
Location
Land within the city or located in the heart of the region is easy to finance. However, its land value also depreciates faster.
You will not qualify for mortgages if the land is on a bank’s list of postcode restrictions if in any case.
Zoning
In investing lands, zoning is significant because the usage restrictions are applicable in certain zones.
For example, you cannot build a commercial business center in a residential zone.
When it comes to size and shapes, large pieces of land are not preferred by banks because it takes longer to sell them.
Infrastructure
Infrastructure includes the availability of public utilities such as water and electricity and road access. The banks require the land to have direct access to an all weathered road.
Whenever you want to build water services and septic tanks, you can.
Various Ways In Land Investing
Developing Raw Land
Some investors only buy land to develop them. Yes, it may be a profitable strategy, but it also calls for a long and expensive process.
If you aim to establish a commercial or residential property, you can build from the ground up by buying the raw land in a suitable location. Make sure to think about zoning when you go through the process.
Buy and lease
If you aim to own land and create a passive income out of it, the ground can be leased for a third party to use it.
For example, if you are an owner of a 50 acres piece of land and the raw land is ideal for farming, you may lease the raw land to farmers who can make money out of hiring the raw land from you.
The tenant of the land will also be responsible for taxes, land development, and land maintenance.
Flipping land
Flipping land is one of the most famous methods of land investing. It also merely means you are buying a parcel of land at a low price, and then you will sell the land at a higher price.
Read: Land Investing: Land Flipping 101
Buy and hold
Some investors are buying lands intending to hold the land long term and develop future land.
The landowner is merely waiting for the right time that the area of the piece of land he owns demands a high land value.
Buy and sell with owner financing.
This is another way of earning a passive income out of land investing. Owner financing means that the seller of the property carries the funding for the buyer.
The down payment is provided by the buyer and repays the loan’s remaining balance according to specific terms. The buyer is responsible for developing and maintaining the land, including paying tax dues.
Read: Owner Financing 101
Types of Land Investments
There are a multitude of potential land investments. You can look at different types of land for your exit strategy. In general, I’ve found that you can do well buying land inexpensively and selling it for a profit.
- Residential development land
- Commercial development land
- Cropland
- Livestock-raising land
- Timberland
- Mineral production land
- Vegetable farmland
- Vineyards
- Orchards
- Recreational land
Residential and Commercial Land Investments
This investment offers a workable entryway into an investment because virtually an unlimited number of land development opportunities can be arranged to meet an investor’s capital and time constraints.
This is an ideal choice for small land investors as they do not require direct management and are diversified by the type of property, and can be purchased or sold on a real-time basis.
Row Crop Land and Land for Livestock Operations
Raw land purchased for crop farming and livestock operation affords the ability to enjoy land investing.
You are generating an income out of that piece of land. Nonetheless, there are several challenges as well for small land investors like:
- It needs a massive capital of finances in order to start the row-crop or livestock operation.
- There are ongoing fixed costs related to running the farming operations
- The risk of business financial leverage for such operations is very high as well.
- The stress level far surpassed the welfare that people yearn for as landowners.
That being said, it is fair to say that most small land investors should keep away from pursuing these types of large-scale farming operations, as the risks and hardships of such activity will likely exceed any benefits.
Small Farm Investment Opportunities
Vegetable gardens, timber farms, mineral development lands, vegetable gardens, orchards, vineyard, and recreational land are agricultural endeavors that are attractive to small investors.
The portion of the land acquisition can be customized in order to meet the investor’s capital constraints.
The business operations can produce a proceeding income stream. Most of all, investors can enjoy being on the land while it is being used.
Doing Your Due Dilligence
Once you have established your decision to buy raw land for investment or development purposes, consider your strategy for acquiring land and profiting off the land.
Land-use restrictions may decrease the way the owner can utilize the land.
Land easements may provide grant access to a portion of the property to an unrelated party.
The transfer of rights may be granted to the unrelated party with the authorization to extract and sell the products from the land for financial gain.
The deed is the document where all of the legal specifications about the parcel of land are documented.
It is generally a public document and can be obtained by dropping by the land records and deeds division of the appropriate county clerk’s office.
Land Access is one that you have to consider as well, especially for small investors. This refers to the access of the land to the essential utilities e.g., electricity, telecommunications.
As an investor, you should also review and consider the following:
- Land’s annual property -tax obligation
- Assessment of the possibility for trespassing violations
- Analysis of the proximity of the land from the landowner as well as from the nearest community.
All of these challenges are significant to consider before investing a land. If your land financing scheme is not well thought and planned carefully, you may end up wasting money, time, and effort.
Worst of all, you may not be able to use the land you have purchased.
Take, for example:
If your land lack access to the essential utilities may hinder the ability to utilize the land.
If you are not carefully paying the property taxes, it will impact your finances, which is a bad idea for land investing.
If there is an issue with land’s remoteness, it may affect a landowner’s opportunities to enjoy the property.
All these challenges should always be considered very well before jumping into investing in purchasing the raw land.
Frequently Asked Questions
Which is better, investing in land or investing in a house?
Investing in a land or house can be a sound investment. Each deal is different. You will need to consider which is more profitable.
Is land investing a lousy investment?
Possibly yes, but if you are a smart investor with a great strategy and always open to generate income.
Do you need an Online Broker to Invest in Land?
Online brokers provide an excellent opportunity to land investing. Investing in land can save you the legwork and lower your risk level.
