Why investing in land may be a good investment
Investing in land is a long game that can make money in the short term and lots of money in the long term if you know what you are doing or are getting good advice from an experienced developer like BHI.
We will address some common issues that keep investors from investing in land or working with a developer to maximize their investment.
1. Land as an investment:
The common misconception is that a vacant piece of property is pointless as an investment because there’s nothing on it. No homes, apartments, or retailers to charge tenants rent. No office tenants to charge tenants long-term leases, so what’s the point of owning the land.
Well, with the proper advice and a clear plan or vision in mind many investors can make land ownership work for them. Do your homework, by knowing the zoning laws, knowing the traffic levels (both walking and drive-by), knowing the future plans for the area of your property can result in major benefits. Knowing a good deal of the factors surrounding your land investment can result in opportunities to sell, develop, or lease your land rights leading to major profits on your investment.
2. Land can produce income:
Investors that don’t understand the potential of a land purchase will advise against land as an investment because it doesn’t produce immediate income. Don’t listen to them; they don’t know what they’re talking about. Land can make you money even without building on it. Here are just a few ideas that can make you money without building or developing the land for permanent structures; you can rent it to farmers, billboard companies, solar panel grid companies, mobile home/tiny home parks, or even rent it out for events and festivals. The point is that you need to have a plan or strategy or work with a development company like BHI that can help develop a plan or vision for you.
3. You can only buy land near where you live:
From a due diligence standpoint, there is absolutely some value in being able to visit a vacant plot yourself before you buy it. You can see what it looks like on-site, what the surroundings are, and if there are any sights, sounds, or smells you find unappealing, etc. But, you don’t NEED to visit your property in-person before you buy it.
Nowadays, there are a lot of ways to see, evaluate, and understand a vacant plot before you buy it, zoom, reviews from property sites like Zillow or virtual torus with a knowledgeable agent or developer.
The important thing to realize is, it doesn’t need to be YOU who should physically inspect, measure, survey, and evaluate it. You can find this help with this from a company like BHI. Besides unless you’re an experienced developer or surveyor you won’t know what you’re looking at anyway.
4. Land has a fixed measurable value:
A professional appraiser or county assessor or local realtor is going to set the price based on similar comps of other land parcels in the area. But because these values are subject land prices can be heavily negotiated.
5. You can buy land at a price range that fits you:
While websites like Zillow, realtor.com, or LandWatch.com are a good start when looking for a home to buy, they may not be the best resource for buying open plots of land.
Land “value” is a subjective thing with vacant land. All land has value to some degree, but pinning down a precise number that everyone objectively agrees with is another thing entirely. Many land deals come from people who inherited their land (it was never theirs, and they never wanted it, or they don’t care). Or perhaps they bought it a long time ago, their plans changed, or some financial event has happened and they need to cash out now. In any case, a lot of time you will find people who want to sell, but they don’t know where or how to cash out their unwanted property quickly.
You need a professional to like BHI advise you on the best price.
6. Land purchases can be simple purchases:
Unlike home purchases or commercial real estate, land is definitely simpler than most other types of real estate because of the fact that there’s nothing on it. Nothing that can fall apart, break, get stolen, burn down, or otherwise. This alone makes land much easier to deal with.
When you’re buying a piece of land, there are a lot of things you need to think about and evaluate, depending on what you plan to use it for. This is why it’s crucial to have a specific plan in mind, so you know what to look for in the first place.
For example, is there road access to it; local planning and zoning; does it have access to all the basic utilities (and if not, can you create that access); are there any usability issues (prone to flooding, is it on a steep slope, is it near wetlands, is there any access to water, can it handle a septic system, etc). Having good advice from a company like BHI can mitigate many of the issues you may face in a land purchase.
7. You can’t mortgage land:
Unless you have an immediate plan to develop a piece of land in some way (i.e., build a house, create a subdivision, etc.) or make money from it (i.e., using it for farmland, leasing it out to solar farms, etc.), most lenders want nothing to do with vacant land properties because of the risk of repayment.
Most land is owned free & clear because they have to. But that fact makes it easier to negotiate the price.
Hopefully, this has helped answer some of those common misconceptions and issues people have about vacant plots of land as an investment property. Land is a great investment, but easy to make a mistake with the proper advice.
Contact BHI Construction & Real Estate Development at www.BHIbuilds.com for a free consultation.