Land is one of the most stable and lucrative investment assets you can own. While the stock market fluctuates and real estate prices rise and fall, the value of land tends to steadily increase over time.
Here are some of the key benefits of investing in land:
Little to No Competition – most real estate investors don’t think about land when it comes to investing.
Easy to Acquire – landowners tend to be easier to deal with and more motivated than other property owners, especially if they have owned the parcel of land for a while.
Appreciation – Land values have consistently gone up over the long term. As population growth continues and demand for land increases, prices are likely to continue rising. Purchasing land now can pay off hugely down the road.
Passive Income – Land can generate income in several ways, from leasing to farming to mineral rights. Leasing your land to a farmer, developer or other business provides regular passive income.
Inflation Hedge – Land acts as a hedge against inflation, maintaining its value far better than other asset classes during inflationary periods. While the dollar loses value, land retains its worth.
Tangible Asset – Land is a tangible asset that you can use and control. You don’t need a third party to hold or manage it for you as you do with stocks or bonds. It provides security in case of economic downturns.
When looking to invest in land, consider the location, economic health and growth projections for the area. Look for parcels in high-demand regions near cities and infrastructure development. The ideal land will have attributes like water resources, road or utility access and productive soil.
Do your due diligence to understand zoning regulations and property taxes on any land you consider purchasing. Though land doesn’t require constant active management like stocks, you still need to monitor it occasionally.
With strategic purchasing and patience, owning land can become a core component of a diversified investment portfolio.
Here are the 7 Steps to Land Investing:
|Step 1: Define Your Purpose
|Before you dive into the world of land investment, ask yourself: What’s your purpose? What is your exit strategy? Are you looking for long-term appreciation, development opportunities, or a passive income stream?
|Step 2: Research and Location, Location, Location
|The success of your land investment hinges on thorough research. Explore different locations, consider market trends, and analyze the potential for growth. One suggestion is to stick to primary markets.
Some free resources for data are: nar.realtor and city-data.com
|Step 3: Financial Mastery
|Understand your financial options. In other words, how do you plan to finance or buy the land? Some viable options are: owner financing, wholesaling/flipping, tapping into private funds, personal lines of credit or creating joint ventures.
|Step 4: Finding Leads of Land Owners
|The good news is that landowners are usually more motivated than property-dwelling owners, especially if they have owned the piece of land for a while. Some great ways to locate landowners are through tax delinquent records, research on tools like Propstream, MLS (aging listings) and For Sale By Owner.
|Step 5: Marketing
|How do you market to landowners? Direct marketing actually works very well for this real estate strategy, especially sending “Blind Offers,” where the investor sends a letter with an attached offer to purchase the property in question. Also phone calls, especially as a follow-up to the blind offer letter, if you do not receive a response within a week.
|Step 6: Due Diligence
|Land investment requires meticulous due diligence. Check zoning laws, land use regulations, and potential restrictions. Investigate the property’s history, boundaries, and any environmental factors that might impact your investment. I suggest you don’t pursue due diligence until after you have a contract or agreement on the property.
|Step 7: Closing: Celebrate Your Success!
|By the time you close, you should have an exit strategy in place. Are you going to flip the land? Develop it? Or hold on for appreciation?
Investing in land can seem daunting at first, but with the right research and long-term vision, it can be one of the smartest moves you make. Land is a finite resource that is only increasing in demand as population grows.
The key is purchasing the right parcels in strategic locations poised for growth. While past performance doesn’t guarantee future results, historically land values have done nothing but go up over the long haul.