Is Investing In Land For Everyone?

Many people enjoy the thought of living on a ranch, away from the city. The idea of owning lots of wide, open space or a cottage tucked in the woods has been passed down from generations when having second homes and vacation properties were common and enjoyed. Today’s land consumers are fewer and far between as money gets tight and more people are selling rather than buying, but the dream for land ownership lives on for many. When you think about it, our country was founded and flourished on the thought that people ought to own land. But how realistic is this goal?
Prior to buying that ranch out west or an empty lot in your neighborhood, weigh out the benefits and drawbacks of owning land. The greatest benefit to possessing land is that as the population keeps growing, land will become more and more precious. The simple supply and demand theory comes into play here and the price will always increase. Buying raw, undeveloped land itself (with no structures or improvements) births several advantages. Most especially if you’re considering a long-term investment. Land that hasn’t been cultivated will be less expensive than property that has existing structures like buildings, sewage, water or electricity. In many raw land purchases, buyers are able to buy the land and then save up the money to actually build at a later date.
One possible disadvantage to land ownership is that the property won't be generating any income and its value will be in appreciation only. Realistically you can expect it to take years for the value to increase adequately. So if you need or want a quick money maker, buying vacant land is not your best option. You should also have a geological survey performed before you buy to determine what, if any, restrictions there may be in building on the land. If the land is found to have unsuitable conditions, you could have a difficult time building yourself or selling it later. You want to check the zoning information as well too, because if it’s zoned for commercial use, any plans for residential use are gone.
Another positive to buying vacant land is that you won't be paying for maintenance and the taxes are going to be cheaper too. With no structure on the property there are no concerns in finding renters and worrying about meeting city regulations. If in the future you decide you don’t want to build, or can’t afford to you, can always sell the land. Keep in mind as with any real estate, the key to owning land is the location. If you’re going to invest in land, pick something that’s in a good location. To invest in land or not is only a decision that you can make. If you have money sitting aside that you're looking to make a solid investment for your future, vacant land could be a great investment for you.

Why Buy Land As An Investment?

Not all of us with money to invest should do so with land investments. There are risks in this type of investing and not everyone is cut out for that kind of headache and worry it can bring. The investor that purchases land will reap spectacular rewards. Sometimes you need to have patience for those rewards to come. The one fact about investing in land that is for sure, they aren’t making any more!

So maybe you have some money set aside for retirement and your 401k isn’t performing like you had hoped. Retirement is getting closer and you aren’t comfortable with what you have put away to live off. The thought of investing some of this money is enticing to you, but you just aren’t sure how to go about it. We are going to offer some insights here that we hope will give you a direction.

Sometimes land purchases consist of a team of the investor and a developer. Some investors will make their money by keeping the property by holding it while it goes through phases. The developer is the one guiding the phases and the more phases, the more money the investor can make. The downside to this is there is no set time frame for long it will take to go through those phases. It could be a fast process with quick return or depending on the market.

For example, the value will increase on the anticipation of a building or a highway planned for an area. However, if these plans drop off, then the anticipated appreciation is delayed or may even become nonexistent. When the market slows, land values take longer to appreciate. Such as the announcement for the plans to build an airport is announced. Immediately, the value of land in that area skyrockets! Then when the plans fall through, could be financing issues or zoning issues, that value will drop.

Another approach by investors is to put the land to use while waiting for the appreciation to grow. Using the land to generate residual income till the time is right to flip it for a tidy profit. You can lease the land to a garden center that uses it as a nursery when they store plants and trees. Driving ranges are another way this land can be used. Any improvements made to the property should be fully depreciated over the holding period. In the meantime though, a cash flow is generated by the use of the property that will pay for the improvements and then some. Even if the area doesn’t take off as anticipated, you can continue using the land for business purposes while waiting for appreciation to increase.

While a land investment can be the best real estate investments, it also can be one of the hardest. Many investors are not able to invest in land because of the risks involved. However, those that do can look forward to significantly higher returns than other investments offer.