Is Raw Land a Good Investment?

Land is one of the most solid investments available. It will always be worth something, and there’s little chance of it being stolen. Raw land is undeveloped property with no buildings or other structures — it is still in its natural state. If you’re thinking about investing in it, the trick isn’t so much about buying at a good price but selling at the right time for a good profit. Investing in raw land is for people who can afford to wait years until someone comes calling for the land. It’s not a good idea for people who want to do a quick flip or need to develop an immediate income stream.

Location of Property

Raw land values increase at a faster rate at the center of a growing city or around the perimeter of cities. But, any raw land in an area showing population growth is worth investment consideration because such growth attracts developers. The whole idea of investing in raw land is to choose property that will appreciate in value and attract a buyer who will pay more for it down the road.

Raw Land vs Developed Property

Investing in raw land is less costly than buying developed real estate in the same area simply because there are no improvements on raw land. However, banks are a bit more cautious about fronting money for raw land that is not being used for any income-producing purpose and will usually ask for a higher down payment — sometimes up to 50 percent of the land purchase. On the other hand, mortgage loans typically require a 20 percent down payment or less. Land loans also have shorter maturities — 10 to 15 years versus 30 years for mortgage loans. You can also expect to pay higher interest rates for raw land than you would for mortgages.

Purchase Timing

Economies at all levels are vulnerable to boom and bust cycles. Local economies are often tied to a major industry. The area may have a spike in population growth and lots of land and home sales for several years. Those boom years are followed by too much product on the market and a sharp decline in sales. You are more likely to make money on raw land if you buy during the bust cycles and sell during the boom cycles.

Pitfalls of Raw Land

Be leery of buying from owners who have held the property for only a short time, especially if the owner is a builder or developer. If they’re trying to sell fast, it likely means they have inside knowledge that the land isn’t as valuable, or won’t be as valuable, as they thought. Raise another red flag on any property priced too low for the market. That can mean the land has fallen outside the path of progress.

You also need to visit the land itself, even if it means a road trip. Never invest in raw land based solely on photos in a slick sales brochure. Do a thorough investigation and don’t allow a high-pressure salesman to rush you into a decision.

Are you ready to start looking into land as an investment? Give Asset Quest a shout today to learn more!

 

Buying Land? Here’s What You Should Know!

The dream home you and your family envision moving into might not exist. If that’s your dilemma, you have the option of having your house built from scratch. After you have an idea of what you want your new home to look like, you’ll need to work on securing the land that you want your house to stand on. Here’s what you need to know about buying land to build a house.

What to Do Before You Purchase Land

If you’ve decided to buy land, keep in mind that it’s not going to be a short-term project. Buying land is a major undertaking and to begin the process, you’ll need to figure out how much breathing room you’ll have in your budget for a new house.

Some of the costs you’ll have to account for include fees, permits, the cost of purchasing the land you need, the cost of building your house and the cost of having to make adjustments to the land in order to have access to running water and other utilities (if that’s not already in place for the land).

Choosing the Right Land

Once you have a budget in place, you can start your search for a plot of land. A quick internet search can show you where land is available in your region.

Confused about what to look for when buying land to build on? You’ll need to find an area where zoning laws won’t keep you from buying land for the investment property or home you want to build. Zoning rules set restrictions concerning things like the size of buildings and the kinds of businesses or residences that can be built.

It’s also a good idea to make sure that the land’s soil doesn’t prevent you from building, digging a well or getting electricity and natural gas. Will the land’s elevation be an obstacle? Are there any liens on the land or environmental problems that need solving? These are some examples of the types of questions you’ll need to answer before you can prepare to buy land.

While it’s possible to buy a house or a plot of land without the help of a real estate agent or broker, it can help to have someone on your side who specializes in working with vacant lots. A real estate professional can hold your hand through the entire process and help minimize hiccups. If you’re opposed to using an agent, it’s important to find a real estate attorney who can address your legal concerns.

Ready to get to purchasing land for investment purposes? Contact the expert team at Asset Quest today!

Land As A Quality Investment

Discussions of real property investment normally focus on single-family homes, multiple-family dwellings and commercial properties. Land rarely enters into the conversation, even though can often bring higher returns. Anyone can buy land, but there is far less competition than trying to land a stock or other investment that other people are vying over. And since real estate investors tend to sway towards apartments and homes that they can rent, you’ll be stuck in fewer bidding wars and will be able to negotiate on price.

Investing In Land

Why choose land over classic real estate investments? There are many practical reasons.

Land is usually low-maintenance. You rarely have a tenant, which means you won’t be receiving midnight calls on a Saturday night because of a broken toilet. You also won’t have the aggravation of trying to evict the seemingly-nice couple who refuse to pay rent and have trashed your property. In most cases, you’ll rarely (if ever) have to even visit your property.

The second consideration when investing in land is financing. Getting a loan for any real estate investment can be difficult these days, as financial institutions’ easy money policies died with the recession of the late 2000s. Although it is often more difficult to obtain financing for land investments than it is for a primary residence that’s actually a good thing, because it has made seller financing the standard in land sales.

Seller financing is a boon for investors because terms are highly negotiable. Unlike a bank, a seller is likely to consider you a qualified buyer as long as you can prove you have sufficient funds to make the down payment and at least a few monthly installments. They’re often this lenient because they’re motivated to move the property. They’d certainly prefer to receive a lump sum payment, but most are happy just to establish a cash flow if they can’t negotiate payment in full.

Property taxes are another advantage to purchasing vacant land. You’ll only be paying tax on the land itself and not on structures, so your total yearly bill will be substantially lower. Taxes on large parcels can still be a drain, however, so be sure to take property taxes into account when evaluating land as an investment.

Know that you know some of the advantages are you ready to get investing? If so, give Asset Quest a call today.

How To Know If Raw Land Investing Is Right For You

Raw land investing has become increasingly popular among real estate investors over the last decade. Raw land (i.e. vacant or undeveloped land) is a great way to earn and maintain steady cash flow, but it isn’t necessarily the perfect option for every type of investor.

Real estate entrepreneurs come in all different shapes and sizes, and with all different goals and aspirations; however, there is one common trait they all share: the desire to be their own bosses and rid themselves from the confinements of their nine to five jobs. Because there is such variety among the real investing crowd, it makes sense that not every investment opportunity will benefit every investor in the same way. Rehabbing properties might work well for one investor while another, equally successful, investor might have better luck with buy and holds. Does this make either investor better than the other? No. Quite the opposite, in fact. Because each investor knows how to play to his or her strengths, they both excel in their individual niches.

So, will raw land investing be your new niche? Consider the following four items before making that decision:

To Attempt Raw Land Investing Or Not To Attempt Raw Land Investing, That Is The Question

It is fairly safe to say that when Shakespeare wrote his famous lines for Hamlet, “to be or not to be, that is the question”, Hamlet was contemplating whether or not to take a stab at raw land investing. Determining your niche as a real estate entrepreneur is, after all, a pretty life altering question to ask.

All jokes aside, deciding which path to take in the world of real estate investing is something every investor should put a lot of thought into. It is important to ask yourself the right questions and do the proper research before jumping into a particular niche so that you set yourself up for success. The ability to designate yourself as “man (or woman) in charge of your own destiny” and call your own shots sounds pretty enticing, which is why most people want to start a career in real estate investing; however, if you want to run a stable, profit-producing business, it is crucial to not jump in the deep end of investing too fast.

This is where raw land investing comes to play. If you are a person who is just getting their feet wet in the real estate investing pool – or even if you’ve been running your own successful investment business for years – making a raw land investment is a great place to start or expand your business. If you like property that is relatively inexpensive, low maintenance, and can produce significant cash flow, undeveloped real estate is about to become your new best friend.

The great thing about investing in raw land is that there is virtually no competition, which is perfect for those whose negotiation skills aren’t quite up to par. Most real estate investors get so caught up with rehabbing, wholesaling, and rental properties, that they fail to see where another great opportunity lies: raw land. Land is a limited resource, so those who own a piece of it are considered to be highly valuable, especially as raw land becomes more and more scarce. It can be purchased for fairly cheap, and once you own some, there isn’t much you have to do. The beauty of land is that it acts as the ultimate buy and hold. There are so many ways to make money off of raw land as well. You can rent your land out to farmers or hunters, you can develop it, or you can simply let it appreciate and sell it down the road as land becomes even more limited.

Okay, so now that I’ve got you intrigued, it is time to analyze yourself so that you can decide whether or not raw land investing is right for you.

  • Can You Manage Risk? Although raw land investing tends to be predictable, as with any type of investment, there is always some risk involved. If you are the type of person who is easily overwhelmed by the unknown or conversely, you are someone who jumps into things hastily, raw land investing is not a niche you should pursue. When you invest in a plot of land, you are essentially predicting the future. The moment you put money down on the table, you are saying, I believe that what I am buying into will increase in value overtime. While, in theory, you are probably right – land is limited and the human race will always need more space to develop – there are some things that are out of your control. Suppose a natural disaster strikes and your land gets flooded. Perhaps a fire ensues and burns the crops of the farmer you are renting to and he or she decides to stop paying you. Although these are rare scenarios, they are not impossible and therefore, as an investor, you must prepare yourself for the worst. On the other hand, if you are an adrenaline junky who is drawn to risk like a moth to a flame, it is likely you could make a investment decision based on feelings over facts.
  • Are You Financially Organized? When it comes to raw land investing, more than likely, you will not realize a profit as fast as you would if you were rehabbing or wholesaling properties. Because of this, it is crucial that you are vigilant about organizing your finances. This should not, however, deter you from undeveloped real estate. Because raw land is a buy and hold investment by nature, it can be awhile before your land appreciates enough to produce cash flow. If you are a novice investor, you must perform an honest evaluation of where you stand financially. If you are a seasoned investor, you must assess the state of your finances in terms of your current investments and how you want your business to grow. If you are inherently frugal and make money saving a hobby, it is likely that you will realize success as a raw land investor.
  • Will You Prioritize Research And Due Diligence? Raw land investing is all about asking the right questions, and if you’ve never purchased vacant land before, you are probably not up-to-date on the jargon and terminology. Before investing in any land, it is vital to first research the market. Has there been recent development in the area? Is your plot of land in the path of future growth? If the answer is yes to either of the above question, your property already meets some crucial criteria. Next, you should talk to your lawyer, the seller, and you inspector’s about the zoning on the property. Are there clear boundaries drawn on the plot? Is it zoned for commercial, residential, industrial, mixed-use, or agricultural development? What was the land used for previously? Asking and getting specific answers to all these types of questions is an absolute must. Also be sure to ask questions about the land’s topography, required annual taxes, available public utilities, usage restrictions, and road access. Minding due diligence and researching the right questions is what sets apart the successful raw land investors from the not-so-successful raw land investors.
  • Do You Have Support? Unfortunately, raw land investing – or any type of real estate endeavor for that matter – is no “get rich quick” plan. It takes a lot of hard work and perseverance to realize success in the real estate investing world, which is why a solid support system is crucial to have. While it is important to rely on yourself as an entrepreneur, your own personal cheerleader is nice to have when times get tough. Whether this be a business partner, fellow investor, or family member, as long as you have someone to talk through your decision making process with, you are more likely to be successful compared to someone going into raw land investing alone. If you are having trouble finding your support system, consider joining a local REI group or even create your own meetup.com group. Isolate yourself from the naysayers and negative nancy’s in your life and find people who are there to help you stay motivated.

If you’ve answered yes to at least three of the above questions, consider raw land investing as your next business venture. If you’re ready to take the next step, contact an expert member of the Asset Quest team today.