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Investing in Land Real Estate for Retirement: What You Need To Know

Choosing how to save for retirement can be a decision that takes years. After all, that’s the money that you’ll be living on during your golden years. Most people stick to 401ks and stocks, but what many people don’t know is that you can invest in land real estate to save for retirement. Investing in land real estate can be a great way to save money long-term, but with any investment, you need to know what type of land to invest in, what sort of returns you can expect, and what to avoid when investing in land real estate.

There are many benefits to investing in land real estate. One benefit is that if you invest in land in different areas, you will be protected if certain properties are hit by natural disasters or the value of one type of land real estate drops. Geographic and commodity diversity can keep your money safe even in a rocky market. Another benefit is that land real estate (farmland in particular) sometimes have higher returns than stocks do. Most stocks can be expected to produce a six to seven percent return over time), while farmland has produced a steady 11.5 percent annual return over the past twenty five years.

If you are looking for a low-maintenance investment, vacant land is a great option. It is cheaper to buy than developed land, and you don’t need to spend money doing repairs or renovations. While this is an excellent investment to make in the long-term, you will have to be patient. This investment will take time to make money. You’ll also want to keep an eye on the market to make sure you’ll be able to sell it at the best possible price. Consider looking into vacant land properties in areas that are seeing an increase in population or jobs. This land will is likely to become more desirable over time, and you’ll be able to sell it at a higher price than what you bought it for originally.

When investing or buying vacant land, you should always know who you are buying from.Be careful of people who have only owned the land for a short amount of time and seem very eager to get the land off their hands. Vacant land takes times to accumulate value, so it’s suspicious if people only own it for a short amount of time. The owners might know something about the land that makes it less valuable. This is a perfect example of why it is so important to find an agent with the expertise and experience needed to conduct land real estate transactions – like an Accredited Land Consultant (ALC).

Timberland or forestland are also excellent long-term investments. The returns for timberland real estate tend to move counter cyclically to other markets.  Because of this, it will add portfolio diversification, lowering the risk of losing money. Timber is also a hearty crop that can provide you with returns for many years.

You should invest in timber or forest land only if you are planning to retire ten or more years down the road. You’ll have to spend money to plant trees and won’t get returns as they grow, but once the trees reach maturity, they will provide steady returns.

Although investing in land real estate to save for retirement is an excellent option, there are some key factors to look out for. Keep the following in mind while you look at different properties:

-You need to know the land inside out. You need to know everything about the land you are investing in. This means zoning, mineral rights, any environmental hazards on the land, usage restrictions, access easements, taxes on the property, and the likelihood of natural disasters in the area. If you think you are asking too many questions, you are not. Even small issues can end up costing you a lot in the long term. For example, you could have an incredible property with full mineral rights, but if the soil drainage is poor, the value of the land could drop so dramatically that any other positive factors wouldn’t matter at all. Finding an ALC near you can help ensure that you see the whole picture when it comes to investing in a piece of land.

-You need to be crystal clear on the taxes. This was mentioned in the previous bullet point, but it’s so important we added it again. Some properties have taxes that are so high that the taxes eat up any returns you make on the land. Speak with your land agent about this and make sure you understand what your costs will be before investing in a property.

-Are there wetlands on the property? Thanks to Waters of the US (WOTUS) and other laws, if you have wetlands on your property, huge parts of your land might not be useable. This could cause the value of your land to drop dramatically.

Investing in land real estate can be a great way to save up for retirement. Land real estate is a valuable and limited community that, historically, continually grows in value. If you do your research and spread your investments out over a few different types of land, you could have a successful start to saving and creating a well-balanced, diversified portfolio for your retirement.

About the author: Laura Barker is Marketing Assistant for the REALTORS® Land Institute. She graduated from Clark University in May 2017 and had been with RLI since October 2017.

investment

Yes, You Should Invest in Land Real Estate

“I have always liked real estate; farmland, pastureland, timberland and city property. I have had experience with all of them. I guess I just naturally like ‘the good Earth,’ the foundation of all our wealth.” — Jesse Jones, entrepreneur

Real estate investors and buyers alike have always had an affinity for land. There is just something about land that draws in savvy investors. Whether it’s the innate, territorial tendencies we have deep within or the simple magnetism of connecting with nature in a world increasingly becoming cluttered with high rises and highways, our instincts are doing what they do best, pointing us in the right direction!

Whether its amber waves of grain or purple mountain majesties, land continues to prove be one of the most profitable long-term investments from sea to shining sea. The USDA’s 2017 Land Values Summary released in August shows that from 2010-2016 average farm real estate values have cumulatively increased 43 percent or an average of 6.1 percent annually and average cropland real estate values have cumulatively increased 51 percent or an average of 7.3 percent annually—that’s quite a return on investment! It’s no wonder smart investors are flocking to invest in the land real estate market.

RLI 2017 Land Markets Survey

In fact, the 2017 REALTORS® Land Institute Land Markets Survey shows that out of all buyers in land transactions, there was a five percent increase in those who were investors in just one year from 2015 to 2016. With so many different types of land to choose from when investing and so many different ways to invest in land, the possibilities are almost endless. If you aren’t sure where to start, just keep reading.

Hopefully by now I have your attention and you are no doubt wondering “why is land real estate such a hot investment?” There are a lot variables that can be mentioned here but the simple answer is best summed up by Mark Twain as “Buy land, they’re not making it anymore.” Compared to other investments, land can be purchased relatively cheap if you find a motivated seller. Being a limited resource and non-depreciable, it’s a fairly safe asset when looking for a solid return on a long-term investment.

invest in land

For those looking to invest in land real estate to diversify their portfolio, buy a property to retire on, or just get in on the action, there are a lot of great resources out there. Just keep in mind that when investing in land real estate, it is crucial to consult a professional with the experience and knowledge necessary to conduct these kinds of transactions. Land is a whole different animal than residential or commercial real estate and there are agents out there who dedicate themselves to being experts in this field. The REALTORS® Land Institute offers investors an easy to use search tool to find a qualified local agent called Find A Land Consultant, check it out and get started!

Jessa Friedrich, MBA, Marketing ManagerAbout the author: Jessa Friedrich, MBA, is the Marketing Manager for the REALTORS® Land Institute. Jessa has a Bachelor of Science with a dual major in Business Administration and Marketing as well as her MBA specializing in Marketing. She has been with RLI since March 2015 leading their marketing efforts.

 

Note: Information in this article should not be construed as recommendations for any course of legal, financial, or accounting action.