Investing in land is a great idea, but the best type of land to invest in varies from person to person. For example, investing in farmland is great for people looking to diversify their portfolio and the ability to crop out your land for a little extra cash. Investing in timberland is great for those looking for stable, steady growth.
Investing in vacant land has its own unique set of benefits and drawbacks, which we are going to explore in today’s article.
Low Maintenance, High Rewards
Vacant land is unique from other land types in how low maintenance it is. It’s a refreshingly hands-off investment. Quality vacant land (good location, soil, and access) historically increases in value, so you don’t have to do much to see your investment grow. Not only is vacant land easy to take care of, it is often cheaper than developed land.
Your Land, Your Choice
One of the biggest factors that sets vacant land apart from other land types are the endless possibilities of how to increase the value of your investment. There are so many ways to profit off of vacant land that it can be a little overwhelming. Here are just a few examples of ways you can make money off of your land:
- Buy and Hold. As we mentioned in our Investing in Land 101 article, the buy and hold method is exactly what it sounds like – you buy land and sell it when the land appreciates enough to be sold at a profit. It’s the safest, though usually slowest, way to make a profit.
- Transition the Land to Its Highest and Best Use. Transitional land is such a multi-faceted and dynamic topic that we have a whole class dedicated to it. Transitioning your land to its highest and best use requires a deep understanding of the markets and different types of land, as RLI’s Marketing Manager Jessa Friedrich, MBA, pointed out in her article Transitional Land: Finding Highest and Best Use: “What makes transitional land a unique area of real estate brokerage is the fact that the ultimate use of the property might not be easily recognized. In fact, the very nature of transitional land is that the highest and best use is dynamic.“ Be sure to work with a land professional with experience when trying to identify your property’s highest and best use.
- Lease the land. You can lease your land out for storage or to other landowners. This allows you to still make an income from the land with minimal effort on your part.
- Add solar energy or wind. The structure of the solar farm can add value to the property and you can profit from the energy coming in. Twice the profit!
- Forest the timber. If you’ve got timber on your property, you could have money. Find a land expert that specializes in timberland transactions to find out if you find out if your timber is ripe for the picking.
As with investing in anything, there are drawbacks to investing in vacant land. One of them is the property taxes. This is something you should take into consideration especially if you are considering the buy and hold approach. Depending on your property, the property taxes might outweigh any profit the land might produce.
Another drawback is that no matter which way you choose to invest in vacant land, it’s likely that the returns will be slow. Don’t pour your money into vacant land and expect to see huge returns in a few months. It’s important to work with a land professional who knows the industry inside and out, like an Accredited Land Consultant (ALC), to get the best returns on your investment.
Investing in vacant land is the ultimate “diamond in the rough” opportunity. You have endless ways to make money off of your investment – which one will you choose?
If you are looking to invest in vacant land, check out our Find A Land Consultant tool to find a qualified land agent near you with specialised expertise in your market.
About the Author: Laura Barker is a freelance writer based out of California for the REALTORS® Land Institute. She has been with RLI since October 2017.