What To Know Before Buying Raw Land

Raw land has become the rising star of the land industry. People used to ignore raw land, thinking the lack of development made the land worthless, and would invest instead of developed land. However, in the past few years, landowners have realized that raw land is a low-maintenance way to save for retirement. Today, we’re going to explore this land type and how you can make the most money off of buying raw land.

The Basics

Raw land is a property in its most natural state. The land has not been cultivated for any sort of crop or livestock. There are no improvements such as walking paths, homes, or fences.

For years, people didn’t invest much time or thought into raw land. It was dismissed as a poor money maker since it didn’t have any man-made improvements on it and didn’t generate any income. What many people didn’t realize is that even though raw land wasn’t making an income, it was increasing in value. As raw land becomes rarer over time, the value of the land goes up, making it a great investment to save for retirement. Improving the land by getting rid of any environmental hazards or removing invasive plants also helps to increase the value.

Buying Raw Land Vs Developed Land

There are two main differences between raw and developed land. The first is price. Raw land is almost always cheaper than developed land. This is because developed land includes improvements that make it a lot easier for the buyer to make money off of the land. If you want to save some cash and do improvements to the land yourself, raw land could be an excellent choice for you.

The other main difference between the two land types is the flexible uses of raw land compared to developed land. You are often limited to what you can do with developed land. Since developed land has already been cultivated by previous owners, the land is perfect for whatever they used the land for (hunting, crops, etc.). However, if you want to use the land for something different, that might not be possible or could be costly. For example, if you find a property that you think would be excellent for hunting, but it’s already been developed as farmland, it will be extremely difficult, if not impossible, to change the land.

With raw land, you can typically do whatever you want with the land as long as it meets the requirements of the soil type and zoning laws. This is a huge benefit for landowners who want to sell to a wide variety of buyers. Raw land can usually be used for recreational, residential, farming, pastures for livestock, or whatever else you can think of. It is a blank canvas for the owner to do whatever they want with.

Turning A Profit From Buying Raw Land

Raw land was passed over for many years, but in recently, people are viewing it as a viable option to save money for retirement. As we’ve covered in previous articles, land is a great option for saving for retirement. Raw land has been a popular choice for retirement savings thanks to the low-maintenance, 1031 exchanges, and the gradual increase in value over time.

Another bonus to investing in raw land for retirement are the tax benefits. Raw land tax benefits are designed to prevent you from losing money off of your land. In his November 2017 article for RLI, Bill Humphrey, CEO of New Direction IRA, described the surprise benefits of investing in raw land for retirement:

“Some investors may not realize that property is a permissible retirement asset, but tax-advantaged savings vehicles like IRAs and 401(k)s can own a house, commercial building, or vacant land the same way they can own stocks,” says Humphrey. “These accounts feature tax benefits that can help offset any tax-related concerns that may otherwise deter a potential real estate investor. Pre-developed land has flown under the radar as a viable option for real estate IRAs, but that has changed rapidly over the last several years.

Raw land’s rise to popularity in the land industry is well-deserved. Buying raw land is an excellent option for anyone who want a low-maintenance way to save for retirement or a blank slate to do whatever they want with it. To make sure you get the best raw land at the best price for you, be sure to use our Find A Land Consultant tool to find a land expert near you.