Investing in land is considered one of the top strategies for putting your money to good use in today’s economically uncertain world. Buying land, however, can either result in profitability or ruin if you aren’t careful. To get the most benefits from investing in land it is important to do your due diligence.
While investing in raw land may not be the most glamorous, if done correctly, land investments can produce passive income, potentially high returns, and large profit margins.
What Are the Steps You Must Take To Invest In Land Safely?
When held, flipped, improved, or developed, land has the potential to maximize your investment returns. The real estate market is a hot sector. Investing in land however potentially means your money is illiquid and until you are able to find a buyer, you are responsible for all taxes, permits, and maintenance requirements.
Working with a professional will provide a measure of certainty, especially one that’s local where you’re looking to buy a plot. Find a local real estate or land buyer’s agent that has experience in land parcel exchanges.
Especially if you are not familiar with a location, this expert will know the market trends and nuances of the area. In addition, you’ll learn of locations that are projected for growth in the future, increasing your odds of a return on your investment.
Here are five steps to help you invest in land.
1. Establish Your Financial Capacity
Your financial capacity as a land investor is the one characteristic that can either open up investment possibilities or limit the extent of acreage and the development that generates profit. Land is often cheaper than property real estate, especially if it’s outside city limits and not slotted for commercial establishments.
Keep an eye, however, on skyrocketing land market values, as well as additional charges that can shoot up the allotted amount. The capacity of your financial breadth should accommodate any unexpected costs that can arise no matter how carefully you’ve done the required homework.
2. Don’t Believe the Hype That Only the Rich Can Buy Land
On heading out into your preferred land market area, you’ll be surprised to find buyers that can barely scrape together financing or savings to buy a plot. The myth that land ownership is for the select few is false, as acreage is now within the grasp of working-class individuals or families.
Price for any spread will be determined by where it’s located and what the plans for commercial growth are in that area. Starting to scout early and working with a buyer’s agent will go far towards the effort, vigilance, and patience needed to invest in land safely.
3. Use both Micro and Macro Approaches In Your Land Investment
Keep an eye on major, often international economic trends as well as local national, state, or county land market upheavals. These macro and micro factors must be continuously monitored if an investor can safely purchase and profit from the land.
You’ll look into the history of the land sector in your target area while peering into the future for any projected developments that’ll cause property values to appreciate. Knowing how other long-term investment forms are performing and what their returns are.
To invest in land safely and for a viable revenue forecast, see the yields of insurance policies, mutual funds, pension plans, gold, or stocks. Between 2008 and 2013, land displayed the highest return on investment compared to other assets.
4. Go Small To Earn Big
Are you tentatively testing the market for a land investment as a beginner investor? Ask your estate or buyer’s agent to find you a plot within a cluster of other available lots. As your investment grows or financial capacity improves, you’ll be able to add to your land, especially if there’s been a consistent appreciation of value.
Buying in increments is a better option for a pennywise investor, instead of getting straddled with extra acreage for which you’ve no money to develop. Investing in a small lot and adding to its boundaries will shield you from any market fallout, and where a seller offers such flexibility should be considered.
5. Evaluate the Tax Benefits
Every aspect of savings on tax rates or interest attached to the land you’re investing in should be thoroughly investigated. Perform research and lay groundwork regarding the tax benefits that your investment in a parcel will attract instead of assuming there isn’t.
If you’ve sourced financing to buy your plot, you may capitalize on the payable amount’s interest, along with a better tax rate for the cost of acquisition.
If your investment strategy is to hold and sell the land or flip it at a nearer date, you’ll get tax benefits in the form of capital gains. Building developments that you may choose to set up on your lot are subject to construction principles and interest tax benefits once they’re completed.
Conclusion
When looking to invest in land, don’t rely solely on a particular area’s buying or selling trends, as these are subject to change. The national, state or local authorities will often come up with special economic zones or SEZs, new airports, transport, or industrial corridors that will suddenly raise the land value. Remember to be thorough with the paperwork for plot possession, looking to see if there are any impediments to recouping on your investment.