The real estate industry has always sparked interest in investors. Despite initial qualms, all investors are forced into wondering, is land a good investment?
A good investment strategy is focused on diversification over anything else. Investors steer safe from storing all their eggs in one bucket, which is why they look for diverse investment opportunities. Land has been a fruitful investment option for most investors, but there is still some skepticism regarding the returns on offer.
Yes, buying land can be a good investment if you have all bases covered. You can purchase an empty lot and start immediate development on it or just hold undeveloped land for a period of time to let the value appreciate by itself. Sound investment decisions can help you make the most out of land.
As is the case with any investment opportunity, there are multiple strategies to help you diversify your purchasing decisions and make the most out of your real estate investment. While land may not specifically give you staggering results, it can prove to be a safe store of value based on future development, zoning laws and better market conditions.
We have invested in land and real estate for many years ourselves and have given sound advice to investors looking to diversify their real estate holdings. The bottomline trickles down to just how careful you are with your investments and the kind of portfolio you are looking to set. By the time you finish with this resource, you will have your hands set on real estate listings, and would have knowledge of the kinds Bernie Madoff dreamt of.
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Is Land Flexible?
Regardless of whether it is a developed lot or an undeveloped piece of land in its raw form, land can open flexible opportunities. There are tons of options open for people looking to invest in land. One of the biggest motives driving real estate transactions is the dream to build one’s own home.
Another possible motive behind real estate purchases can be to hold the real estate land for a specific period of time until it appreciates further and rises in value. Once the land has appreciated to a desired level, the investor can sell it to a developer to transform into a completed project.
Some investors can even purchase raw, undeveloped land near the countryside to raise cattle on and run a farm. All such investors know that the cattle and the land can be sold at an appreciable gain whenever they want.
Land near the countryside can also be developed and used to build a rental property, which you can put on rent for others. The rental property will help fetch you some extra pounds and will give you good monthly returns on your investment.
Land does come with immense potential, which makes it ideal for flexible investment opportunities. Land is in fact extremely flexible in nature and can help give you the kind of return you bargain for.
Is Land a Solid Retirement Plan?
If you are currently working a day job and are worrying about life after retirement, then you are pretty much in the same boat as every other corporate worker in the United States.
As soon as workers cross their 40s, they start worrying about life after retirement and think of a solid investment plan, which can help safeguard their interests after retirement.
Land and the opportunities to earn on it can act as a solid investment plan for the future. Life after retirement isn’t just all about money.
You would need something to do with all the extra time you have. Land gives you a good return on your income and comes up as a decent way to incorporate a daily routine to follow after retirement.
Rental properties and farms, as highlighted above, can give you the potential to earn a stable amount every month and keep yourself occupied. Land can be a good way of generating a residual income and can give you the financial security you need in case of an emergency.
If you own an undeveloped or developed lot, you can also sell it in the nearby future at a reasonable rate. Owning land isn’t just a good way to safeguard your future after retirement, but it can also help your finances grow.
It really can be a blessing to have something to do after retirement, which can help generate revenue and give you something to be proud of.
Land Investments Appreciate Steadily
Perhaps the best thing about investing in land is there will always be buyers available for it. Land will always remain in demand, as there will be some use for it. The investments you make in real estate are bound to grow steadily over time and will give you a good bang for your buck.
However, if you want steady returns from your investment in land, it is necessary that you study the factors related to the purchase.
To start with, your investment in land should be connected to proper roads and should have adequate road access. Additionally, the soil quality should be good, and the land should have relevant business activity around it.
As an investor, your best bet would be to invest in a piece of land that is near a commercial or residential area but hasn’t developed much. Undeveloped areas located close to other residential and commercial properties are usually in demand and considered desirable because they are bound to go up in value once construction starts around them.
Your ideal choice of land also comes down to the intended use you have for that land. You should always check the businesses operating in and around that area and should make sure that they have some sort of footfall or activity happening around your lot.
Additionally, to experience the right gains from a piece of land, you should invest in it at the right time. Do not invest in land after it has peaked because that will diminish your earning potential. Buy land when it is at its lowest so that you are able to generate a steady gain from it.
Is Land a Good Investment?
Land can prove to be a decent investment in the long run and can also be used as a good way to generate a passive income. A passive income includes everything you earn alongside your active income. A full-time job will count as a source of active income because you show up every day for a sizable amount of time and get paid for it.
A passive income would be something you aren’t actively doing during the day and can still make a decent amount from.
Investing in land and opening up rental properties and other avenues on it can prove to be beneficial in the long run. You can go by the traditional rules of the book and let your investments in real estate be for some time. Check on them after 3 to 4 years and see how the value has appreciated.
Additionally, if you have invested in vacant land, you can also use that investment to generate some extra money. As we have discussed above, the vacant land can be used to start a passive source of income.
The opportunities are plentiful and you can leverage your investment to gain an additional sum, on top of selling the real estate for a gain later down the line.
All of these factors combine to make land a good investment choice for the future. You should, however, follow the required due diligence at your end and make sure that you aren’t missing out on anything.
Many investment methods can be quite restrictive in the policies they follow and implement. For instance, when investing in the stock exchange, you have to abide by the policies put down by the authorities. You cannot buy in bulk; you have to go by the defined limits and cannot exceed them.
Land passes the baton of freedom over to you and allows you to follow your own instincts and routine to gain value.
You can buy land in any part of the country if you understand the legislative rules and abide by the policies and tax regulations. In fact, if you go by policies and legislature, you can buy land pretty much all over the globe.
Once you own the real estate property, you can use it in whatever way you want. The real estate property you own can be used to generate additional income as well.
You can open a parking lot in the space, use it as a farm or even open a rental property. The freedom you get from investing in land is one very important factor, which makes it a good investment option.
Tips to Follow for Investing in Land
Investing in land can be good in the long run, but you need to follow some important covenants and make sure that you aren’t missing out on any detail. Your investments in land can turn out to be profitable if you are diligent during the purchase process and follow the tips and directions that are expected of seasoned investors:
Time all Investments Wisely
A good real estate investor should study the specific real estate market they look to invest in and find out basics related to it. Your real estate investment will be heavily influenced by the factors at play within your local specific market.
A good tip you can follow while investing in the real estate market is to avoid all industries that are usually at their peak. Do not buy property when it is at its peak, as you risk losing out on the gains.
Real estate markets are known to be cyclical in nature, with gains at profit going up and down based on the demand for them.
You should ideally be on the lookout for markets that are rising and haven’t yet peaked. The market you choose should come with rising capital investment rates and one where the construction industry is generally down.
If you are choosing land to ultimately build a house on, then you should consider other factors as well, besides the capital gain on offer. Some of these factors include:
- Crime rates within the market
- Schools nearby the vicinity
- Access to good medical care services
- Access to leisure destinations, including parks
- Family-friendly environment within the property
- Access to good public transport
- Located nearby your future places of work
- Access to restaurant and malls
All of these factors will help determine the feasibility of the location and will also drive demand and prices in the future.
Buy When It is Low
You should look to buy land for investment purposes when the market is low and you can get a good bargain on property. The return you get on your real estate investment in land will only prove fruitful when you are able to sell it off at a remarkably high rate than what you purchased it for.
Hence, you should look to buy land that is relatively cheap now and can give a good return later down the line. However, you should still be aware of the fact that some neighborhoods and properties that are down currently will remain down in the time to come as well.
Some neighborhoods that have a high crime rate might have cheap land available today, but that land would still be cheap some 3 to 4 years down the line if the crime situation does not improve for the better. Hence, be clever in your purchases.
Tap into Distressed Sellers
This might sound corrupt at first look, but the real estate market functions this way. Since land isn’t a liquid asset, there are often buyers looking to turn their real estate holdings into cash urgently.
You can tap into this market for distressed sellers and get a good deal from a couple going into a divorce or children selling Dad’s property just after he passed away.
Cash matters a lot to such sellers, and they wouldn’t mind letting a few thousand bucks go off from the selling price if the end result is immediate cash in their hand.
You will need to find distressed sellers on your own through listings and personal research. Going through a realtor will take away the benefit of the deal.
If you are new to the world of real estate investment, you should make sure that you understand the full costs involved upfront rather than ruing your missed opportunities later.
You would want to know everything, including taxes and other payments so that you have a fair idea of what you have to pay when the deal first actualizes. Make sure you have the budget to buy a particular property before finalizing the deal.
If you buy undeveloped land and want to sell it off as a developed lot, you should estimate all costs and know what the process will cost you.
Understand the Market
You can successfully invest in the real estate market if you understand how the industry works and the different factors that contribute towards fluctuation in rates.
You should know just how much it will cost you to invest in a specific real estate market and how the costs will change over time. You should also know the market enough to differentiate periods of heightened market activity from periods of reduced market activity.
Don’t Give in to Paid Advisors
One of the biggest mistakes we have seen investors make before investing in real estate is to listen blindly to paid advisors and not do their own homework.
It is necessary that you do your own homework beforehand and don’t blindly listen to paid advisors. Your paid brokers, tax accountants and wealth managers may ask you to avoid investing within real estate in your portfolio. The same textbook definitions of real estate being illiquid are given over and over again to keep investors away from the industry.
However, since the cat is already out of the bag, paid advisors get commissions and bonuses for selling stocks and private mutual funds to you. With real estate investments, there is no commission on offer for them.
You should figure your own finances and do your own homework before falling for what they have to suggest to you. Make sure that you sit down with an independent real estate professional and know the pros and cons of investing in real estate.
Look for Government Backed Projects
Governments across the world have various real estate projects backed by incumbent ministers and ministries. Projects such as SEZs, new airports, industrial corridors, smart cities and industrial zones have great investment opportunities for private investors.
You should keep track of all such government backed projects so that you can invest in one next time there is news of such a project.
This is perhaps the oldest financial tip in the book – always start small to gain big. You can follow the tip with stocks and bonds, but how do you implement the same with real estate?
Our tip here is to buy small plots of land that are clustered against one another. Buying one such plot and holding it for a while will help give you an idea of how the market is performing and the gains that are on offer.
Once you are sure that the market is responding favorably, you can add other plots located next to the one you had purchased and add them to your portfolio. Do not invest in major chunks of land and be left with less when you can go for smaller plots and add property with time.
There are many risks involved with investing in real estate land. These risks include financial and legal risks, which can raise liability against you. However, once you go through this guide in detail, you will know your answer to ‘is land a good investment?’ The answer is a resounding Yes!
Land is a profitable investment opportunity, and the sooner you invest in it, the better are your chances of making a profit. Regardless of whether you sell your property off for an immediate profit or hold onto it for long term gain, land will prove to be a fruitful investment.
About THE AUTHOR
Brittany has been in the land business since 2020 when the world was starting to shut down because of COVID-19. Since then, we’ve sold to dozens of people from ATV weekend warriors to camping enthusiasts to retired truck drivers. Our inventory spans mostly in the western United States. We’ve been trained by experience, land acquisition courses, and hundreds of hours meeting with county assessors and clerks, zoning officials, realtors, and land investors. We’ve answered hundreds of questions from people regarding the buying and use of land.Read More About Brittany Melling