With the right knowledge and experience, investing in land can be highly lucrative for real estate investors. Raw land investing offers a unique opportunity for investors to unleash their creativity and potentially enjoy attractive profit margins. In this article, we will explore the benefits of raw land investing and provide tips on how to evaluate and profit from your land investment.
What Is Raw Land?
Raw land refers to undeveloped plots of land that have not been prepared for construction. Despite the absence of grading and subdividing for construction, raw land investing is gaining popularity among real estate investors. The appeal of buying land lies in its flexibility and potential for development. Investors can turn raw land into any type of property they envision, making it a blank canvas for creativity and innovation.
Does Land Appreciate?
One of the key advantages of investing in raw land is its appreciation potential. The limited supply of undeveloped land, coupled with increasing demand, drives up its value over time. As the population continues to grow, the demand for land increases, making it an attractive commodity. Therefore, it's not a question of whether land appreciates, but rather how much it will appreciate.
How Many Years Can You Finance Land?
The loan duration for land investments varies depending on factors such as location and intended use. Lenders are more willing to extend loan durations for land that exhibits intrinsic value, as it represents a less risky investment. However, most loan terms for raw land typically have a limit of about 10 years or less. It's important to consider short, restrictive payment terms when investing in land.
What State Has The Cheapest Land Per Acre?
Not all land investments guarantee future gains, but there are affordable plots of land with great potential for profit. Here are five states where raw land prices remain relatively affordable compared to future potential:
- Tennessee
- Arkansas
- West Virginia
- New Mexico
- Arizona
Types Of Land Investments
When considering land investing, it's important to understand the various types of land investments available. Each type comes with its own benefits and considerations. Here are three common types of land investments:
Commercial And Residential Land Investments
Commercial and residential land investments involve buying lots that are zoned for a specific use but are yet to be developed. These types of investments offer a clear starting point for analysis and financing, as the purpose of the investment is already defined. However, proper planning and market research are crucial to determine the most profitable development options.
Row Crop And Livestock Land Investing
Row crop and livestock land investments require familiarity with the agricultural industry. These investments involve analyzing market prices and the performance of agricultural products, such as corn or soybeans. Understanding the farming companies that would lease the land and their competitors is essential. These investments can be profitable but come with additional responsibilities and risks.
Small Farm Land Investing
Small farm land investments are typically used for timber, minerals, orchards, vineyards, and more. These investments are considered easier to break into compared to row crops. However, investors still need to have a basic understanding of agricultural practices and regulations. Small farm land investments offer potential profitability with less complexity compared to other types of land investments.
6 Benefits Of Raw Land Investing
Investing in raw land offers several benefits for investors, including:
- Easy acquisition process
- Limited competition compared to other real estate investments
- Low cost of ownership and maintenance
- Potential for quick profit
- Flexibility to build or hold the land
- Potential for passive income
However, these benefits are not guaranteed and require due diligence, research, and careful consideration of market conditions and financial viability.
Raw Land Issues To Consider
Investing in raw land comes with its own set of considerations. Land use restrictions, access to utilities, property tax expenses, and other factors can impact the profitability and development potential of the land. Investors should also be aware of specific issues related to the type of land investment they choose, such as market fluctuations for row crop and livestock land investments or legality issues for small farm land investing.
Land Investment Tips: How To Invest In Land And Profit
Successful land investing requires patience, strategy, and careful planning. Here are a few strategies to consider for making your land investment profitable:
Subdivide For Land Sales
Subdividing your raw land investment into smaller lots and selling them individually can increase its total value. This strategy takes advantage of marketability and the potential to find buyers for smaller, more affordable parcels of land.
Develop It
Developing raw land into residential, commercial, or multifamily properties can significantly increase its value. Depending on the location and zoning regulations, investors can explore various development options to maximize the potential revenue from their land investment.
Buy And Hold
Buying raw land and holding onto it for the long term can yield significant returns through appreciation. Investors can purchase land below market value through auctions or tax sales, enhancing their potential for positive returns in the future.
Lease It
Leasing raw land for various purposes, such as billboard rentals, cell towers, ranching, or utility companies, can generate monthly rental income. This strategy allows investors to earn passive income while holding onto their land investment.
How To Evaluate Your Raw Land Investment
When evaluating a raw land investment, consider the following factors:
- Location: Is the plot located in an area with growth potential?
- Zoning: What are the current zoning regulations for the property?
- Utilities: Are essential utilities available, such as water, electricity, and internet?
- Property history: Research the title history and ownership disputes, if any.
- Potential issues: Consider any limitations or restrictions imposed on the land, such as flood zones or legal constraints.
- Ingress or egress: Assess the accessibility of the land for development and future use.
Performing thorough due diligence and seeking professional advice, such as land surveyors and lawyers, can help ensure a successful evaluation of your raw land investment.
Is Buying Land A Good Investment For You?
Before venturing into raw land investing, ask yourself the following questions:
- Can you manage risk and handle the uncertainty associated with land investing?
- Are you financially organized and prepared for the potentially longer-term nature of land investments?
- Will you prioritize research and due diligence to make informed investment decisions?
- Do you have a support system, such as partners or like-minded investors, to provide guidance and motivation?
Answering these questions honestly will help you determine if raw land investing aligns with your goals, risk tolerance, and financial capabilities.
Where To Find Raw Land For Sale
Finding raw land for sale requires specialized websites that focus on buying and selling land, such as Land Watch, Lands of America, and Land Flip. Additionally, driving around target markets, researching county tax records, and conducting direct mail campaigns can help you identify potential raw land investments.
Raw Land Investing Terminology
As you delve into raw land investing, familiarize yourself with key terminology:
- Zoning: Legal designation of land for specific use, such as residential, commercial, or agricultural.
- Zoning Variance: Request to change the current zoning regulation.
- Mineral Rights: Ownership of natural resources, like coal, ores, or gas, on a piece of land.
- Air Rights: Rights to use or develop the space above the land.
- Land Bank: Registry for vacant properties, raw land, and foreclosed homes.
- Ingress or Egress: Entrance and exit points of a property.
Understanding these terms will help you navigate the raw land investing landscape with confidence.
Summary
Raw land investing can be a profitable venture for real estate investors who conduct thorough research, practice due diligence, and develop a solid investment strategy. While it entails certain risks, buying land offers flexibility, potential appreciation, and various investment opportunities. By evaluating your goals, financial situation, and risk tolerance, you can determine if raw land investing is a suitable investment option for you.
