While buying land may not seem to be among the more glamourous of real estate investments, the reality is that buying land can be a great investment if you are smart enough to know what to know before buying land. If you have a complete understanding of how to invest in land and make money – like a real estate developer, learning how to buy land can offer a great opportunity to generate great returns or create a passive income stream. It can be one of the best money hacks possible.
Is Land a Good Investment?
So, if you are seriously considering learning how to invest in land and make money, be certain to ask relevant questions like –
- Is buying land a good investment?
- Should I invest in farmland rather than raw land?
- Where can a new land investor learn the ins and outs of how to invest in land or how to buy vacant land?
- Can you buy land with a credit card?
- Is land a good investment for someone with limited capital?
- How can I find what to know before buying land online?
- Is buying land with a loan or buying land cheap a prudent investment strategy?
- Where can I find the right loan for buying land?
But similar to other prudent investment strategies, buying land as a profitable investment requires due diligence. The narrative that follows takes a deep dive into buying land, how to invest in land and make money, and where to find the best loan for buying land – plus other essential information that is important to know as you learn how to buy vacant land.
Keep reading to learn practical tips for buying investment land!
Why Invest in Land?
While not all land is equal in value or utility, overall, there are several advantages to buying land. The reasons for buying land cheap or buying land with a loan are detailed below and offer answers to these questions –
- Is buying land a good investment?
- How to buy land as a sound investment strategy?
- How to find what to know before buying land?
Buying Land Offers a Good Return on Investment
Choosing to invest in farmland or vacant land offers various ways to earn double-digit returns on one’s investment if the right land can be purchased for the right price.
Additional Land is Simply Unavailable
Land is a limited commodity which is one reason buying land with a loan (or without) can be a prudent investment. Plus, land is forever in demand, and, as populations grow, they will require additional land development. And nobody’s making any more land.
Land Requires Little to No Maintenance
Because raw land, by definition, is undeveloped, there is no property maintenance (or tenants, for that matter) to contend with. Other than keeping property taxes up-to-date and safe, undeveloped land is recognized to be among the investments that require the lowest maintenance.
The reality is that more investors work in the residential and commercial markets than that in the land marketplace. And while there are other land investors, there are typically good deals to be found for vigilant investors who do their due diligence.
Buying Land, How to Find Ways to Invest
To learn how to invest in land requires a complete understanding of the various ways to manage the funding portion of buying land. Below are the strategies that explain how to fund a land purchase, invest in farmland, or secure a loan for buying land.
Flipping land is likely considered one of the more popular methods of buying land. The investment strategy of ‘flipping’ refers to a technique in which an investor buys a land parcel for $X and then sells the parcel for $X +$Y – for a yet-to-be-determined profit. Many land investors find great deals at foreclosure auctions or tax sales.
And while a land flip can be as simple as finding a great deal and selling it quickly for a profit, some land investors understand that a great return on their investment can be generated by obtaining the appropriate property entitlements, which further adds to the parcel’s marketability.
In addition, obtaining entitlements will likely add value to the property because the potential buyer will no longer have to absorb the costs, risk, and time required to obtain them. Entitling could include, in part –
- Working to zone (or re-zone) the property.
- Clearing the property for further development.
- Subdividing the property.
- Obtaining permits for builders, to name a few.
Here is a quick example to help clarify the point – an investor purchases a ten-acre parcel of land for $25,000. They then work with local government officials to legally subdivide these ten acres into ten parcels. When complete, the investor can sell these ten distinct parcels of land – separately, which is likely to increase the overall selling price, thus increasing the investor’s profit.
Developing Raw Land
Land investors have the option of buying land that they wish to develop. While developing land can be quite profitable, it is often a long, drawn-out process that can be expensive. However, real estate investors who wish to develop a plan will find that buying raw land is inevitably part of the development process.
The Buy & Hold Strategy
With time on their side, land investors often choose to purchase raw land with the intent to hold the investment for the long term. Holding the land investment allows the investor to –
- Develop the land in the future.
- Wait for an anticipated increase in demand, and thus, value, among other reasons.
But note, a landholder must continue to make payments for taxes as well as any maintenance.
The Buy & Sell Strategy with Owner Financing
A landowner can opt to sell their land but offer the buyer owner financing (instead of bank financing), which essentially creates a passive income stream until the buyer has paid the seller’s financing in full. The title passes to the buyer, responsible for the taxes, maintenance, and any land development.
The Buy & Lease Strategy
This strategy allows for a land investor to set up a stream of future passive income. A buy & lease strategy is created when a landowner leases the land for use by another party. A farm landowner can lease the property to a farmer, who would then pay monthly rent and be responsible for the taxes and maintenance as well for the use of the farmland.
Is Buying Land a Good Investment? The Take- Away
Like any investment strategy, choosing to invest in farmland or vacant land can be a prudent investment if the investor remains committed to the required due diligence. If you wish to learn how to buy land, it is important to take the time to understand the nuances of the process and the local real estate customs.