How To Invest In Land

Land purchases are one of the most popular and reliable ways to invest your money with the prospect of achieving financial gains.

Whether you are a real estate tycoon or a regular homeowner, there are many ways you can invest in land.  The most common ways are to buy lands that are in a rising market, have development, show potential for harvesting natural resources, are capable of farming, or have attractive land features.

In reality, there are so many approaches an individual can take to increase the value of their property.  A distinction that should be recognized in land investment is whether you are aiming to purchase land for the pure reason of financial gain, as a real estate investor, or whether you are investing in your own private household.  In addition, you should consider the type of land you are willing to pursue your investment in, as this will greatly vary across the board.

Before committing to any land investment opportunities, you should always council your local state or city government, in regard to zoning rights and restrictions, to ensure that all developments and investments you commit to are within legal reach.

‍Types Of Land Investments

The types of land investments an individual can pursue can be extremely dynamic.  A common starting point that most people consider before bringing out the drawing board is calculating how much they’ve got in their wallet and how much of it they are willing to put down on an investment.

The reason that land investments can prove to be so financially beneficial is the potential that land has to go up in market value - either sporadically or over a long period of time.  Regardless, the financial incentives are there and if approached with careful consideration, you may end up coming out of your investment with significantly more than you came in with.

The type of land investment you pursue should also be determined by your overall area of expertise and knowledge of land values and characteristics.  It’s easy to get in over your head with the prospect of becoming rich for investing in lands that ultimately end up not being as valuable as they first appeared.

A major part of this comes with being to adequately analyze land qualities and financial benefits that come with different properties.  In addition, being patient, resourceful, and calculated are characteristics that any real estate investor should wear on their sleeve.

To dive further into land investment opportunities, let’s evaluate the types of properties you will likely be looking at and the financial potential they may bring.

Residential Properties

Residential properties are often very attractive investment opportunities, as they come with a huge variety of highly valuable qualities.

Firstly, residential properties have statistically proven to be one of the safest bets when investing in real estate.  The common trend associated with these types of properties is that their market value only goes in one direction - up!

A consistent trend like this catches the eye of any investor, which is why individuals tend to place their money on residential properties regardless of whether they are looking for a quick flip or a long-term opportunity.  

Given that the location will be such a critical factor to weigh out when considering a residential land investment, you are going to want to analyze the difference between urban and rural residences.

Urban Residences

It goes without saying that residential properties located in urban environments are considerably higher in value and are a more financially feasible investment.  Cities, in particular, tend to have a steady incline in economic growth and offer more job security, which encourages a steady rise in land value.

A perfect example of this can be demonstrated in areas around the United States with property values that have skyrocketed consistently over the years like in the Silicon Valley.  Some individuals who purchased a modest home in this area 40 years ago have seen an increase in the cost of their property by as much as 2,000%.

Trends in the market like this can be challenging to predict, but when carefully analyzing rising industries, there has been a consistent pattern of economic growth and land cost increases in areas that offer this kind of job security.

However, that’s not to say that any urban environment can guarantee such a successful investment - even in a city with a growing economy.  When looking at land investments in urbanized areas you should consider the following:

• Crime rate
• Surrounding features
• Condition of the land/property
• Accessibility to amenities
• Quality of life

Urban areas are a safer bet than just about any land investment out there, but you shouldn’t commit to a property until you’ve weighed all the factors that come with it.

Rural Residences

A residential investment opportunity in a rural area can be more challenging and less appealing to many land buyers, as they can often come with less potential for financial gain.  This particularly steers away investors that aim to make quick cash from their investments, as these properties tend to take longer to increase in market value.

However, there are still plenty of opportunities that come with investing in residential properties that should be considered - which are often overlooked.

Lands tend to be significantly cheaper in rural areas and small towns. While this isn’t appealing at first glance it does present the possibility of taking advantage of low land costs to reinvest in other aspects of the land.  

If your rural land costs a fraction of what it would in a thriving city, this offers up the potential to remodel or even build an entire residence at the price of what a plot of land would cost in an urbanized environment, which will significantly boost the value of your investment.

In addition, not all aspiring homeowners have the same standards and goals in mind when searching for an ideal residence.  For many, there is a great appeal of living in a rural environment, aside from the lower cost, such as privacy and natural surroundings.

At the end of the day whether you are pursuing short-term and long-term financial gain, residential properties offer an investor the ability to make money from their property while they still own it.  It’s common to invest in residential properties simply for the purpose of renting out space to tenants, which in the long run can wind up paying for the property altogether - in addition to the resale value.

Commercial Properties

Investing in a commercial property can be a pretty reliable opportunity when carefully assessing all aspects of the land and the commercial value associated with it.

The tricky side of commercial investments is you need to be assured that the commercial value of the property is worth your time and, most importantly, your money.  No matter how attractive the land itself is, if you are not going to see some form of consistent return from your investment immediately, the land may not be worthy of pursuing.

An exception to such a purchase would be to feel completely confident in the value of the land itself without the commercial value so that you can feel reassured that your investment will hold strong.

Just like any land investment, location is everything.  This will determine the current price of the land, as well as the direction it’s likely to go in the future.  A major distinction that an investor needs to weigh out is whether the commercial property is located in an urbanized or rural environment.

Here’s what you should consider when investing in commercial lands located in urban and rural areas.

Urban Commercial Properties

Traditionally, urban environments have proven to be a much safer bet when it comes to investing in land.  Cities and towns tend to have either a steady or rapidly growing economy, which increases the value of land over time or very quickly.

That’s why many real estate investors tend to prioritize urban areas when seeking out opportunities.  However, that’s not to say that an investment in an urban environment is by any means a sure thing.

Each town and city varies greatly depending on its growing economy and quality of life, which will all play into the current price of the land the success of the commercial business, as well as the direction it will likely keep heading.

If a commercial business is successful and is paired with an equally thriving local economy within the urban area, you can feel pretty confident that you will see a great return on your investment.  However, you should always monitor the various conditions that will affect market trends closely.  

Rural Commercial Properties

Land investors that are evaluating commercial properties in rural areas should tread a bit more lightly when considering acquiring land.  That’s not to say that the investment can’t reap great reward, but just that it needs to be more carefully analyzed for its value.

Rural areas have commonly shown to have a slower increase in market value with some cases stagnating or even declining, which is why the prospect of making significant financial gains makes investors warier of such properties.

The reason for this is that without the commercial business in play, the land itself will likely have been a mere vacant lot or raw parcel of land with no other inherent qualities that increase its value.  And even if the land did have other qualities, the commercial property has invasively taken over the space.

With that being said, when investing in rural land with commercial property, you are going to want to really put the business under a microscope and ensure that the product or service being offered is worthy of your investment.

Aside from analyzing the success of the business itself, you are going to want to assess the economic prosperity of the local economy of the nearby towns (if any).  This will help give you another reassurance of whether to invest your money or not.

Urban Vacant Land

At face value, the qualities of raw and vacant properties don’t always have the most appealing investment opportunities.  The lack of development can appear like a lot of work and the need for further investment, but much is contrary to this misconception.

We commonly see these types of land classifications in rural areas where the potential for financial gain can be a bit of a toss-up depending on a variety of features.  However, in urban environments, vacant plots of land can have massive investment opportunities.

Let’s take a look at vacant lands located in urban areas.

Urban Vacant Lands

If a vacant parcel of land is located in an urban environment that has a growing economy, you may be in for the investment opportunity of a lifetime.  

Vacant parcels of land offer a lot of benefits to the buyer when carefully analyzed.  If the location is prime and the value of the plot is fair, this type of investment presents a lot of freedom and possibilities.

The beauty of owning a plot of land is that the cost of the property would have been significantly lower than purchasing one that was developed.  While this does come with a substantial amount of groundwork for development, it also offers the opportunity to develop the way you please. This essentially entails that you have full control of the overall value of the land.  

Furthermore, investing in an urban plot of land gives you the luxury of sitting on the property and waiting until an ideal time comes around to continue development or you can simply sell the vacant plot as is.

Regardless of your intentions, a vacant plot of land in an urban environment comes with many perks to investors, as the versatility alone is often a reason to opt for such properties.

Rural Vacant & Raw Lands

As stated before, rural lands are a more peculiar land investment than urbanized properties.  This, however, becomes a more interesting investment opportunity when evaluating rural vacant and raw lands.

You will commonly see rural vacant and raw lands that can simply look like a pile of dirt with no apparent or significant qualities that make it worthy of investment.  And to be fair, this may often be the case.  However, vacant and raw lands located in rural areas are often valued not always by what’s on the surface but by what’s beneath it.

There are loads of opportunities land investors greatly benefit from by putting their money into highly profitable raw and vacant lands.  This is due to the potential resources and goods that the lands are capable of producing.

In addition, these lands can often, quite literally, be acquired for dirt cheap - making them appealing to investors who have a keen eye for business opportunities.

To highlight the value and potential financial gains you can make from investing in raw and vacant lands, you should consider how they can be utilized.

Farmland

Perhaps one of the most common uses for raw and vacant lands is to grow food.  Investing in lands that are worthy of producing adequate amounts of crops from farming is a business opportunity in and of itself - without even considering selling the land later on.

Of course, you don’t want to jump the gun and buy the first farm you see with the expectation that it will guarantee you a worthy investment.  The types of foods farms produce vary in price and production value.  In addition, the quality of the crops is determined by environmental values pertaining to the health and fertility of the soil, which is why you are going to want to confirm the potential the farm has for production by hiring an environmental appraiser.

Before buying just about any rural land, conducting an Environmental Impact Assessment is going to be a necessity - especially when evaluating a farm.  Hiring a professional to evaluate your land will confirm whether the raw and vacant land is suitable for farming and worthy of your investment.

However, it may turn out that the land is not suitable for crop growing but may still be suitable for other farming practices such as cattle and other livestock.  Given that cattle and livestock are generally fed feed and are not dependant on the quality of the natural environment of the farm, the potential for owning a highly profitable plot of land is well within arms reach.

The plot thickens further with these sorts of investments, as they can be utilized in more ways than one.  When owing a vast raw and vacant plot of land, you have the ability to divide your property for different uses and investment opportunities; you can sub-divide your land into sections and convert various parts to other investment projects such as a commercial business.

This, however, may not prove to be a wise investment if you opt for a cattle farm.

Harvesting Natural Resources

An investment opportunity one should never overlook is the prospect of acquiring vacant lands that are suitable for harvesting natural resources.  These types of lands can often be easy to spot, as they will have clear structures that represent some form of industrial resource harvesting.

However, that is not always the case.  Some vacant lands may appear to be utterly worthless but there could be a lot of potential there that doesn’t catch every investor’s eye, which is why you may need to seek professional assistance to confirm the value of resources.

First and foremost, you may want to establish the kind of resource or resources you aim to harvest, as this may help narrow down your search for a vacant plot of land.  This will likely be classified by whether you want to harvest renewable or non-renewable energy resources.

Let’s take a look at how you can approach the two when evaluating raw and vacant lands for your investment.

Non-Renewable Energy

The tricky nature of most non-renewable energy sources is that they rarely make themselves apparent above the surface.  This can make tracking down lands that are worthy of their harvest quite challenging, as analyzing the qualities that determine their location can rarely be identified without a professional.

In order to survey your raw and vacant lands for non-renewable energy, you are going to want to hire a professional geologist to assess the features of your land.  The geologist will conduct a series of tests and present a report to you, which will identify the potential for harvesting the resources.

If the report comes back with positive results, you may find yourself with an extremely profitable plot of land at an exceptionally low cost.  Here are some of the non-renewable energy resources you can hope to harvest on your raw and vacant land:

• Oil
• Natural gas
• Coal
• Nuclear energy

It’s important not to be deceived by the initial scope of what raw and vacant lands appear to be until digging a bit deeper to see what truly lies within the property.

Renewable Energy

Sustainable living and green energy seem to be all the hype these days - with many homeowners preferring that their energy source comes from sustainable energy and many vehicles converting to the same platform.

This makes renewable energy a highly attractive quality for land investors that are looking at raw and vacant lands.  This is a particularly revolutionary prospect for land investors, as land that at one point had no initial qualities worthy of harvesting and development, suddenly has a significant investment opportunity.

Much like with non-renewable energy, you are going to want to hire a professional to come to validate the worth of sustainable energy you can expect to harvest from your raw and vacant land.  A Renewable Energy Specialist will be able to adequately assess the quality of renewable energy your land can offer, as well as give you a figure for how much you can expect to receive back on your investment.

Some of the common renewable energies land investors capitalize on are:

• Solar energy
• Wind energy

As opposed to seeking down the often opaque non-renewable energy resources, renewable energies make themselves far more apparent, which makes tracking down investment opportunities much easier.

Types Of Investors

The first thing you should come to terms with when investing in land is asking yourself what kind of an investor you actually are.

Given that land investments encompass such a wide range of approaches, financial opportunities, and strategies, it’s really important that you understand the direction you want to take when evaluating real estate.

The end goal of any land investment is the same - to increase profits and the market value of your property.  However, the approach a real estate investor takes compared to a private homeowner will vary greatly.

To understand the different approaches the two primary types of land investors can take, we are going to analyze the different qualities of each party.

Private Homeowner

The approach a private homeowner will take to invest in their land will be far more subtle than that of a professional real estate investor.

That’s not to say that private homeowners have it easy, as there is always some form of risk involved when investing in land.  There are many ways you can approach your investment to mitigate the risk involved and increase the overall market value of your property in the process.

When approached with caution and consideration, investing in a plot of land for a home or re-investing in an already purchased home, the potential for financial gain is enormous.  The biggest difference between a professional real estate investor and a private homeowner is that when investing in land for a personal home, you are likely going to be thinking long-term.

Long-term investments come with their share of risks and benefits and they should all be considered when committing to a piece of land that may serve as your home for the rest of your life.

You should consider:

• Current market value of the home
• Consulting an analyst to predict market trends
• Thoroughly evaluate the surrounding qualities of your living space
• Seek professional valuation
• Carefully weigh out your finances

Getting a realistic idea of what you are in for when investing in a private residence, will greatly determine the success of the purchase of your home - whether you plan on selling in the future or not.

Professional Real Estate Investor

If you are a pro in the field of land investments or are aspiring to become one, you must always have a thorough understanding of market trends so that you can spot investment opportunities early on and mitigate the risk of putting your money down for something that might lead to a loss.

Professional real estate investors that have been in the business for long enough know how to play the market and know exactly what trends to look for.  However, amateur and up-and-coming investors often have fewer chips on the table and should play their hand more carefully.

At the end of the day investing in property involves rolling the dice in one way or another, which can work out in your favor or against you.  To prepare you for how to wisely invest in properties you should check out the following tips.

Land Investment Tips

1. Understand the market - a professional real estate investor should always understand how to analyze market trends to see investment opportunities.  Alternatively, a pro might have a trusted agent on standby for such opportunities to correspond with.
2. Focus on a specific land - investing in land takes a lot of work and a lot of research, which is why attempting to do it all right off the bat is walking down a slippery slope.  Develop your skills and focus on a specific niche to get yourself started.  This will help you build confidence in your skills and will allow you to raise funds for future investment opportunities.
3. Network - by affiliating yourself with trusted investors in the industry, you can often find yourself in a networking circle of individuals who have been around the block and can offer inside information on up and coming investments.  Be careful with this and only work with trusted and vetted investors.
4. Rising neighborhoods - an easy trend to hop on quickly is to assess neighborhoods that are on the rise.  You can do this by analyzing urban areas that have a thriving job market and are becoming more gentrified.
5. Do your own research - relying on professionals and associates are great resources for bouncing ideas and sharing information, but you should also be resourceful enough to do your own research and often trust your own instincts on investment opportunities.

If approached strategically and carefully, buying land as a professional real estate investor can prove to amount to enormous financial gains.