Thursday, November 4, 2010

Buying Land As An Investment

Some of the highest returns in the real estate investment market come from buying vacant land. Purchasing vacant land is a speculation and comes with risk. Buying vacant land can be compared to buying small cap stocks in terms of the stock market. Compared to large cap companies, small cap companies fail more frequently. However, the ones small cap stocks have consequently shown better overall returns. Not only are they taking a risk, by buying vacant land, but they need cash and plenty of time to wait for the return. If cash and time are plenty, and the investor knows the risks, then buying vacant land as an investment may be right for them.

However, just as with stock portfolios, if an investor is looking to buy vacant land as an investment needs to diversify by not buying in only one area or one city. Any real estate investments, location is critical when buying vacant land. An investor should buy vacant land that indicates it will have future development. Investors look for long term value, but they also want property that produces cash flow. While fortunes have been made from buying vacant land, many investors have made little to nothing on their vacant land purchases too.

Investors should evaluate early on the development potential of any vacant land they are considering such as the soil, terrain and access. They need to determine if it will be suitable for building once any expansion reaches it. The fewer challenges land has the better for investment. Ready to build land will be more valuable further down the road

Areas that are better located for future infrastructure expansion and near major employment centers are areas that investors should consider first. Any barriers such as mountains and rivers that may impede development can be cost prohibitive. If development has already reached the river bank, or mountain side, then the development may start elsewhere.

Investors always keep in mind that is possible for vacant land to produce income. The new investor shouldn’t listen to those who say this can’t be done. Recreational purpose is always in need of vacant land and could produce income while the investor is waiting for the future development to take place. Renting the vacant land to hunters or fishermen or even turn it into a camp ground or off-road vehicle track are possibilities for income. By look at what activities that are in demand and a good fit for the property an investor has possibility of income. Investors who can think outside of the box are limited only by their imagination.

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