If you’re representing an investor looking to add variety to their portfolio, buying commercial and future development land is a great way to do it. Unlike investing in rental property, they can purchase a piece of land, barely put work into it, and still reap future rewards.
What are the Benefits of Investing in Land?
Always in Demand
The demand for vacant land has been growing steadily for the last 100 years. Investing in land is an excellent opportunity because the demand will be there, as our area continues to grow. Land bought and held for the long term almost always generates profit and is one of the easiest ways to make a profit. However like any investment you have to be careful and do your research. Are you in the “Path of Growth” or in a declining area? What are the future costs to develop the property?
Land is a tangible asset, making it potentially less risky than stocks or cryptocurrency. Land will not suddenly disappear or drastically lose its value overnight. Even when the economy is poor, chances are land value may still increase.
Are There Any Cons When Investing in Land?
While land is relatively easy to maintain, you should wonder why the property is vacant before you purchase it. Before you take the plunge, do some research and uncover as much information as you can. Are there governmental or environmental restrictions on the future use of the property.
No Immediate Cash Flow
Without having steady income coming in, it can be challenging to pay expenses such as improvement costs, property taxes, and in some cases, association fees.
An investor should not buy vacant property unless they have the cash flow from other sources to hold the property until the right opportunity presents itself.
Harder to Finance
Traditional financing is hard to find when purchasing land. Typically you will need at least 40% to 50% down. Many Sellers will consider financing a portion of the purchase price. We can help you negotiate financing terms.
Physical Issues with the Land
Before anyone invests in land, they need to do your due diligence and physically inspect it for issues. For instance, flat lots can cause problems with water runoff, and steep land is hard to develop. It is beneficial to research the availability of all utilities septic, sewer, water and environmental history before investing.
Buy and Wait
You can buy land, do nothing with it, and still make money. Investing in land is less operationally intensive than investing in a property as there are no tenants, minimal upkeep, and land generally appreciates over time. However actually doing the work to re-zone or sub-divide rural property can greatly enhance it’s value.
Factors to Consider When Buying land
Though buying land is a relatively passive investment, it is still essential to consider certain factors.
The location of your land has a significant impact on your investment. Picking land in the path of growth and close to popular attractions, schools, highways, etc., can increase your odds of making a successful investment.
Zoning and Restrictions
Before you invest in a piece of land, you should know and understand its zoning and potential uses, what the zoning doesn’t allow, and the possibility of having the land rezoned.
If you plan to use the land for a specific reason, you must find out what the current zoning is. For example, some zoning permits residential purposes, while others may only allow farming.