There are plenty of investment options available nowadays to get good returns. However, raw land investments are comparably less risky. When accompanied by deep knowledge and a strategic approach, raw land investing can deliver incredible profits. Investors who desire a nice payday from their investment should carry out due diligence and pay attention to restrictions before purchasing raw land. Today we will provide some valuable information that will help you to invest in raw land with confidence.
What is Raw Land?
Raw land or vacant land is an undeveloped plot of land—no improvements for things such as building on or growing crops. As there are no improvements done on the land and limited to no maintenance required, raw land investing is inexpensive and becoming popular among investors. Besides selling it to someone else, a raw landowner can utilize it for various purposes within zoning laws and regulations. You might wonder whether raw land investments are ideal for you or the best investment option for you. Earnings investors can get from raw land investment depends on a deal and objective of purchase.
The idea of a raw land investment may appear risky or considered fitting for seasoned investors. The fact is that land investments demand determination and patience for long-term strategies. Thus, the purposes of raw land purchase are different for investors; Some might buy & develop it for an extra source of income, while others would keep it till land appreciates higher in value to sell it for higher returns.
Types of Land Investments
Though land ownership provides a host of benefits, investing in the right piece of the land demands some knowledge. You might have completed your first land investment without much hassle. But nowadays, buyers need knowledge of the market and sufficient capital in order to make a successful land investment. Below are some best land investments that may sound basic but crucial for investors to recognize the differences.
- Commercial and residential
- Row crop and livestock
- farmland investing
Commercial and Residential Land Investments
As the name suggests, commercial and residential land investment properties, zoned for those specific uses. There are some reasons these two land investment types are popular among investors. The primary reason is, these land plots allow certain development types, which helps investors with investment strategy and financing. Also, it gives lenders a clear idea about investment purposes and returns for a plot of land with commercial or residential zoning.
Row Crop and Livestock Land Investing
Unlike other investment types, row crop land investment may be intimidating, especially for beginners. Nevertheless, this type of investment can deliver higher returns when executed strategically. Investors with knowledge of the agriculture industry and real estate are more likely to achieve success with row crop and livestock land investments. Investors must analyze the market price and agricultural product a plot of land is designed to be used for and the likely subsequent returns.
Farmland investing refers to areas used predominantly for timber, orchards, vineyards, and so on. The land use separates farm investment and livestock investment. It’s essential for investors to understand the type of farm and the returns to make sure they achieve their desired profit levels.
Raw Land Issues to Consider
As we’ve said before, raw land investing provides numerous benefits, but there are also some crucial factors to pay attention to. Restrictions of using land can make or break a deal; it is very important to understand the zoning and permitted uses. Apart from that, producing land will be affected by climate and environment. The value of the crop can impact your investment and expectations. Additionally ensure the location of the land you are buying is appropriate for its use, consider tax expenses and access to utilities or the cost of installing.
Be aware of your property zoning and water, for example, it is not located in a flood zone and if it does, it will not impact your intended use of the property and expected income. It is important to know if you have mineral rights or not. If the landowner does not have mineral rights then underground resources may not be exploited or owned by the land owner. According to Investopedia, investors can also gain access to agricultural investments and land assets by using exchange-traded notes (ENTs).
Benefits of Raw Land Investing
Each type of investment carries the possibilities of rewards and risks, whether it is raw land or developed land. Understanding of the market, and the factors that impact the land value pave the way to a successful investment.
The raw land investing pros, below, are some cost or benefits of raw land investment:
- Low cost to own and maintain
- Potential for an expeditious return(s)
- Freedom to build or hold
- Potential for passive income
- Easier to purchase
It goes without saying, but due diligence is crucial for investors to achieve all the benefits of investing in raw land. Due diligence provides investors with an accurate picture that allows them to determine whether they can afford the land and manage potential risks.
Land Investment Tips to Get Maximum Profits
If you’ve reached this section, we consider you are aware of raw land investment benefits and ready to take a look at the ways to make money by investing in raw land:
- Divide a plot into multiple plots to increase the per acre value.
- Development of raw land to improve its use and value.
- Buy and hold raw land, as it appreciates more often than not.
- Collect rent through leasing out the land for short or long-term uses.
Subdivide Land and resale
Subdividing land for resale is common. It’s the fastest way to make money from the raw land investment. Investors with large land parcels can increase the overall value of property by dividing it into lots and selling them separately.
You can develop it accordingly and get the maximum return on your investment. A landowner would need to consider the location, zoning, regulations, and other factors to decide to develop the land.
Buy and Hold
Have you thought of a buy-and-hold strategy for your land investment? Land appreciation is a great source of return for raw land owners expecting good returns by selling land in the future. Land prices have been increasing and will continue to for years to come. Buying and holding raw land has the potential to render excellent profits in the long term.
Leasing undeveloped land is another way of generating consistent cash flow without risks. Plenty of businesses lease land for a few months and years, depending on their needs. Instead of buying, companies rent land to conduct their operation quickly and cost-effectively. Besides that, landowners can lease their land for ranchers, cell towers, utility companies, billboard rentals, etc.
Evaluate Your Raw Land Investment
Each investment type we mentioned here requires different approaches and strategies for the best outcome. Generally, we focus on the location and neglect other aspects when purchasing raw land. Investors must consider some crucial factors to acquire a perfect piece of land and lower their risk. Find answers to these questions when you evaluate your investment:
- Where is the land located?
- What is the history of the land?
- Are any utilities available?
- How is the property zoned?
Investments, in general, involve some risks raw land investment does as well. Investors who incorporate meticulous research and plan precisely are confident when kick off their land investment journey.
Interested in some exclusive land deals with the potential of higher returns? Be sure to check out APXN Property, one of the most popular raw land investing sites for vacant land available in Oregon, Arizona, Florida, Idaho, and other states. You will find well priced land, usually will below what a realtor can offer.