You might have heard hundreds of times: “land is limited, and land investments are rewarding.” Undoubtedly, land investment is a beneficial option for beginners and expert investors.
When we talk about land investments, we generally assume buying an off-grid land parcel and holding it for a few years to achieve higher appreciation. The common belief is, big-budget is critical to succeeding in land investments. Nonetheless, in reality, having a ton of money is not always a prerequisite for land investment. You can invest in land with a small budget and earn enough profits by taking wise steps strategically. If you are eager to know how to invest in land with little money, you’ve come to the right place. Let’s dig deeper into the topic!
First things first, Even if you are on a shoestring budget and dreaming of investing in land, the simplest way to find the low-priced land is by listing sites. Plenty of land listing sites available, in which you can find and purchase a property that has not been sold for over a year. Other listings go very quickly when you work with a reputable private land seller. Look out for a financing option if you get the best deal and understand the necessities. Apart from that, We’d recommend you asking for property access or requesting a delayed closing so that you can save funds to purchase the land.
The idea of choosing land as an investment is tempting. Likewise, buying land with little money. It may take longer than expected. To ensure you don’t run out of options, we’re going to discuss other lucrative real estate investment options.
Why Is Investing in Real Estate a Good Idea?
Investing in real estate is considered a good way of diversifying assets. It is an extremely inaccurate assumption that you need a lot of money to make a worthy real estate investment. Also, most people are afraid of the risk associated with the investment. Those who do decide to invest in real estate (even with little money) are about to embark on a great investment journey.
If you start to invest little sums in real estate, you will be greatly interested in all this opportunity has to offer. This chance of learning more about real estate is great for new investors. You can learn more and even make mistakes without risking a massive amount of money.
Diversification of Income
It is a great idea to not put all your eggs in one basket. That has a huge potential of incurring losses. Real Estate has proved to give good results over time. It can be one of your chosen forms of investment along with other options such as stocks, etc.
High Returns via Real Estate Appreciation
It is disadvantageous to think that just because you have little money, you shouldn’t invest it in real estate. Arguably, the opposite of it is undeniably true. The earlier you start investing, the better results you will receive in the future. As the value of real estate grows naturally by 3 to 5% in a year due to high demand and limited land, it will continue to yield great returns to people who invest in it.
Quick Overview- Types of Land Investment
Land investment is different with well-funded investors as they have plenty of choices and the budget to support it. They can purchase land for recreation, building a house or investment without breaking the bank. Now, you must be curious about what land ownership opportunities are available for investors with a tight budget? How can they find the right piece of land to invest in and get a decent return within budget? What to know before buying land? To get a better understanding of this, you should be aware of some land investment categories.
- Residential development land
- Mineral production land
- Row crop land
- Commercial development land
- Livestock-raising land
- Vegetable farmland
- Recreational land
Residential and Commercial Land Investments
Both residential and commercial land investments can be lucrative and can deliver higher returns. For small investors, there are plenty of land development opportunities that satisfy their budget and time constraints. Real Estate Investment Trust or REIT is an excellent choice for small investors, as it is very low-priced, doesn’t need direct management, and can be obtained or sold on a real-time basis. These investments, however, prevent landowners from using the land freely. If you want to experience land ownership, residential and commercial development can be your choice.
Row Crop Land and Land for Livestock
Your next investment option is buying land for running a livestock operation or row-crop farming to use your land freely and generate constant income. Still, there are complications investors need to deal with; the overall cost of operating livestock is high, making the investment riskier. It’s more likely the large-scale farming operation will put extra stress on a landowner. Thus, it’s recommended to small investors to avoid large-scale operations.
Many small investors may not like the idea of traditional row-crop or farming operation. For them, agricultural investment options can be profitable as it offers exposure to farming enterprises. To give you an idea, some funds provide exposure to coffee, wheat, cotton, sugar, Kansas City wheat, canola oil, corn, cattle, cocoa, lean hogs, and soybean meal, feeder cattle, and soybeans.
If you are interested in investing in specific traditional farming operations, use exchange-traded notes (ETNs). You can leverage exposure to soft commodities, including sugar, cotton, coffee, corn, wheat, and soybeans, with iPath Bloomberg Agriculture Subindex Total Return ETN (JJATF). Besides that, Small investors can appropriate investment exposure to cattle and hogs by iPath Series B Bloomberg Livestock Subindex Total Return ETN (COW). There are some risks involved in these investment options. Thus, thorough due diligence is crucial to know potential risks and rewards to safeguard your funds when making such investments.
Small Farm Investment Opportunities
Small investors who desire steady cash flow and want to enjoy land ownership must invest in timber farms, recreational land, orchards, mineral development lands, and vineyards. Such investments pay off as investors get the opportunity to adjust the scale of purchase and generate a stable income stream. Investors might consider Exchange-traded funds (ETFs) and Exchange-Traded Notes (ETNs) for small-scale farming operations.
Online Real Estate investment or Real Estate Crowdfunding
Real estate crowdfunding lets you add a property to your real estate portfolio without investing a huge sum in it. There are several online investment platforms available that enable you to invest in a real estate property with other investors. There are various large commercial real estate projects which are managed by the developers themselves.
You can think of it as loaning money along with other small investors to the real estate developer. This generally is for a pre-defined time frame and the minimum amount to be invested is quite affordable. One of these crowdfunded real estate platforms is Fundrise. The popularity of this platform is elevating daily as it lets the investors start investing in multi-million dollar projects with a minimum of $10.
Similar to this, another minimum investment crowdfunded real estate platform has Arrived. This platform is popular for offering investment opportunities in Single Family Homes. The minimum investment you can make is $10 and can learn the ins and outs of the residential properties. There are various other crowdfunding platforms that you can opt for such as CityVest, Streetwise, CrowdStreet, Yieldstreet, etc.
Hard Money Lenders
Arranging investments funds from hard money lenders is a viable option. These are private lenders who are known for providing short-term loans for real estate investment. Having fewer guidelines and qualification requirements than a bank or other financial institution, these are easy to secure.
These loans are provided at higher interest rates as the lenders are willing to take up risky projects too. The typical rules include paying back the lenders within 6 to 24 months the entire sum along with interest. Most investors in such situations either sell the property for a profit or refinance it.
A partnership is a common but creative path adopted frequently in real estate financing. The alliance strategy works by finding someone who is doing or has done what you want to do and working for them. You can’t get such benefits for free, of course. Instead, you can provide value to your partner.
The typical situation in such scenarios is one person investing funds in a property and the other managing the property. If you do not have the capital to invest but are willing to invest your time in the management of the property, then you can look for passive investors to partner with you.
Another scenario of such an alliance is when multiple investors join their resources and that accumulated cash is used to purchase a property. You can find such equity partners by joining real estate groups and increasing your network through events, etc.
Seller Financing is a fruitful way of investing in real estate when an investor is unable to secure funds through loans. Here, the investor and the seller come to a mutual agreement regarding the payment terms, interest rate, consequences of default, repayment timeline, etc.
You just need to focus your efforts on finding a seller that is willing to take payments over a period of time or take a lower down payment in exchange for shorter payment terms or a high purchase price. This works great when the deal is a win-win for both parties.
Microloans are another viable option in real estate investments that comes into existence due to the peer-to-peer economy. Generally, these loans are taken to gear up a new business or a startup to arrange the resources necessary to generate further growth. As you will be investing using small sums, you won’t be burdened with high-interest rates or high qualification requirements. These are open to being issued by a single lender or by multiple lenders at a time.
Real Estate Investment Trusts (REITs)
The REITs are the companies that have multiple investors to combine their financial resources to be able to invest in real estate properties. This is a good source of passive income for investors who are wondering how to buy land with no money. Here, instead of purchasing a property, you can invest in the companies that build or manage the properties. One typical advantage of REIT is liquidity.
When you are the owner of a 30% resort then you will find it quite hard to pull your money out. Especially if the resort is at loss, very few people will buy your share or the entire resort. But the REITs are easy to sell like shares of stock. It is highly advised to buy a variety of REITs such as firms that build malls, hospitals, parks, etc.
This will enable you to diversify your income without having to manage anything. You can refer to it as a pool of real estate assets that are managed by real estate professionals, traded freely on SMEs. You can invest in private REITs or public REITs or both. Private REITs are difficult to liquidate and require a higher sum of investment. But the major benefit it provides is that the future price of the shares is predictable.
Public REITs are similar to stock market investing. You can purchase a share and can sell it anytime you want. The price of these shares is extremely volatile. The major downside of investing in REITs is that a good share of profits is distributed to the administrative overheads. The rest is shared with the shareholders.
The BRRRR Method
The BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. This is a smart strategy where the first step is to buy a property that needs some substantial repairs. You can find such properties at low prices as they are in some way damaged. Once you complete the purchase at a discounted price, you can renovate it as per the standard rental requirements.
After renting the place, you get the needed rent via your tenants which you can use to refinance in another distressed property. This process can be repeated as many times as you want and you will never bear extreme costs. These rental properties will yield a good level of passive income every month. As easy as it may sound, you must do thorough research before diving into a purchase.
You should be able to answer quite a few questions before investing in a distressed property. How to determine the after-repair value of a property, How much rent to charge, What must be the cost of the repairs, Which property is worth the effort, etc are some of these questions. You must also figure out ways to get the initial sum i.e the amount to purchase the property and to make the necessary repairs.
Special US Government Schemes & Loans
When it comes to filling the underpopulated zones, the USDA (United States Department of Agriculture) gives mortgages with even a 0% down payment. This mortgage option is generally given to suburban or rural homebuyers. These are those individuals who come under the bracket of having moderate or low-income levels.
The terms and conditions of these loans are provided on the official USDA site. Such loans are typically offered in towns where the population is 10,000 or less. As most towns in the US are of this size, we can assume that 97% of the United States is secure.
Issues to Consider
Investors need to recognize the legalities linked with the use of a land type before deciding to invest in raw land. Land- restrictions can create a stumbling block to the effective use of the land. You better be aware of whether you will need an easement to get access to your property or get a conveyance of mineral rights to bring out and sell minerals for profits. Besides that, A landowner can get access to adjacent waterways with riparian and littoral rights. Small investors should also find out annual property-tax obligations, access to electricity or telecommunications, trespassing violations, etc. Considering these issues, prospective landowners should perform extensive due diligence assessments before purchasing land.
The Final Word
A well-planned land investment saves you from risks associated with investment and ensures you reap maximum benefits after selling a property. A variety of ETFs and ETNs are accessible to investors. All they need is to wisely select and utilize the investment products.
Frequently Asked Questions
Can I Invest in Real Estate Without Purchasing a Property?
Yes, investment in real estate does not always involve ownership of the property. Such investments can be made through the online real estate investment platforms, Real Estate Mutual Funds, Real Estate Investment Trusts, Real Estate Wholesaling, Hard Money Loans, etc.
> Real Estate Mutual Funds
This option is similar to the mutual funds that we generally invest in. The investor holds a little portion of the real estate and gets paid via dividends or share appreciation. The real estate mutual funds can invest in commercial or industrial or residential units, real estate stocks, REITs, etc.
The earning via the real estate mutual funds depends on several factors such as market conditions, interest rates, demand-supply demographics, etc. This is a viable option for investors who do not have the funds to invest in a property but are interested to take advantage of share appreciation.
> Real Estate Wholesaling
Another way of making a real estate investment without owning a property is through Real Estate Wholesaling. Just like property flipping, an investor or a real estate wholesaler signs an agreement where he/she agrees to purchase a property that they believe is underpriced.
This property will be sold to the end-user at a profitable price. This will help in improving your negotiation skills and you will get to earn the revenue based on the fee of the transaction. This fee is generally a percentage of the overall cost of the property.
How Can I Safeguard Myself from Property-Related Scams and Frauds?
It is very important to safeguard yourself from scams related to real estate purchases. As these can lead to you losing all your hard-earned money on fake agreements and offers. You can avoid such frauds by –
- Checking the developer’s track record
- Use trusted websites and platforms to purchase properties
- Get all the details related to your preferred property.
- If possible, visit your chosen property in person.
- Make sure that the seller owns the land you want to purchase.
How Can I Make Money from Vacant Land?
Raw or vacant land is very valuable in terms of the numerous opportunities it can offer to its owner. These are several business ideas for raw landowners that can be implemented to make a huge sum of money. Such ideas are –
- Sell the land at a profit
- Create a Campground
- Rent Plots on the land to build a community
- Offer storage facilities (indoor and outdoor)
- Plant crops
- Rent the land for events or festivals