Is Buying Land a Good Investment? 9 Things You Should Consider Before Investing
The world of real estate is full of many unique ways to develop wealth and generate your own income. From buying rental properties, to running a property management company and more, the options are virtually endless. However, among all of the strategies that exist in the industry, there is one we are going to dive into today.
Is buying land a good investment?
The truth is that there is a lot more to it than simply weighing the advantages and disadvantages of owning land as an investor or calculating the average return on land investments. So, in order to help you make an informed decision let's take a look.
First, it's important to note that investing in vacant land is often a high-risk venture not recommended for novice real estate investors. Also, well-heeled investors may get into trouble with vacant land purchases. The price of land can be affected by various factors, including market rates, zoning limits, or site issues. So, with these risks in mind, instead of asking yourself, 'is buying land a good investment?' ask yourself, 'is buying land a good investment for me?'
However, before we start breaking down the investing in land pros and cons or showing you the best place to buy land for investment properties, I want to remind you that financing these properties is an expensive undertaking and you should not take it lightly.
That is why we want to offer you a free strategy call to discuss the financial side of buying raw land. All you need to do is click the link below to book your call today.
Advantages of Investing in Vacant Land
Naturally, if you are asking yourself, 'is buying land a good investment?' you are going to need to hear the benefits that this particular niche can bring you.
Investing in vacant land might not be the best investment option for all, but it does work for some people. There are some advantages of vacant land, including the following:
Improvement Opportunities
One of the primary benefits of vacant lot investments is the opportunity to improve them. When you purchase a piece of vacant land, you are buying the opportunity to optimize it for its best and highest possible use. This ensures you would not have to follow the restrictions that previous developers placed on the land. When you have a vision for vacant land, you can turn it into reality.
So, is buying land a good investment for investors looking for a project? Certainly it can be.
Less Maintenance
Compared to pre-developed lands, vacant land investments need considerably less maintenance. You won't have to worry about vandalism, plumbing issues, or electrical problems unless you're working on improving the property. You would not need to market the property until it is time to sell because you would not be negotiating with tenants. Your undeveloped land needs little attention or action.
So, is buying land a good investment for investors looking to save on maintenance costs? Absolutely.
Cost-Effective
Purchasing a piece of land is much less expensive than buying a developed site. Particularly if the buildings are in disrepair, vacant lots are considerably less costly than sites with existing structures. As a result, investing in vacant lots typically has a lower entry barrier. Most people who buy vacant lots are willing to sell them, and if the land has been on the market for a while, they can even give seller financing or substantial discounts.
So, is buying land a good investment for investors and builders looking to save money on the initial purchase? It definitely is.
Direct Possession
It is doubtful that you will be able to get funding for a vacant lot. Although you will have to pay cash for the land, you will be buying the property directly rather than relying on a bank to provide you with a mortgage. You won't have to pay mortgage fees or interest, and you won't have to negotiate with banks or brokers after the transaction is over. You will be the sole owner of the property. Annual property taxes would be the only real financial burden.
So, is buying land a good investment for investors looking for immediate possession? Almost definitely.
Discover How To Analyze a Properties Cash Flow With This Step By Step Guide
Disadvantages of Buying Land as an Investor
All investments have the potential for a profit as well as the possibility of a loss. Although it's difficult to predict the path an investment would take until after you have purchased it, it is essential to do your homework ahead of time.
So, is buying land a good investment even with the risks? Many would say yes.
Take precautions to reduce the risk you are putting yourself in. Above all, keep in mind that vacant land investments are always risky. Here are only a few of the major disadvantages of investing in them:
Had to get financing
Investing in a vacant lot can be difficult due to a lack of funding, particularly if you don't have a lot of cash on hand. Even if you can afford to buy the land outright if your liquidity is locked up in the asset. You would not be able to exploit more investments if you have trouble getting rid of it. You might even find yourself in financial difficulty.
So, is buying land a good investment for investors who require financing? Not usually.
However, if you are looking to finance land, our team at LendCity Mortgages has a few lenders that will finance land for 35% down. Click the link above to reach us or call our team at at 1-519-960-0370. Alternatively, you can book a free strategy call at the link below.
Cash Flow Lacking
Many types of investment properties allow you to start collecting rentals from residents or tenants as soon as you buy them. Vacant lots, on the other hand, are an exception. As a result, you won't be able to see a return on your investment until the time comes to resell the property. As a result, you can find yourself in an unwanted financial hardship.
So, is buying land a good investment for investors who want to generate cash flow? Not right away, but if you eventually develop a property on site that cash flows, you might later.
Permittance and Zoning Challenges
The zoning of your vacant land will decide what you can do with it and what future buyers will do with it. To conduct certain acts or receive specific permits, you will need to work on re-zoning the land. However, re-zoning is a time-consuming, expensive, and often futile operation. In addition, the zoning and permitting restrictions that surround your property may render it useless for the reason you purchased it.
So, is buying land a good investment for investors who want to start immediately? Not always.
The Condition of Property
Unfavorable property conditions can make developing or selling your vacant lot more complicated. Water draining off of an entirely flat lot, for example, is extremely difficult. In addition, before the lot has some worth, you'll probably have to invest in grading it. The expense of grading the lot might completely wipe out any profits you could have made from the selling of your asset.
The Shifting of Market
Vacant lots are entirely dependent on the economy. They have less intrinsic value because they aren't built and don't have any buildings on-site. If the local real estate market takes a turn for the worse, this may be a concern for buyers. Your vacant lot's value can fall below market value, leaving you with no cash flow until you can sell it.
Investing in vacant land can be right for you if you're an experienced investor with the savvy and know-how to take on a challenging project. A vacant lot can be used to your benefit financially, but only if you play your cards correctly and do your homework before making the investment.
Vacant lot investment has a lot of potentials. However, there is an equal—and some may say, greater—the risk of failure.
So, is buying land a good investment for investors looking to play it safe? Probably not, but the truth is that risk is a natural part of real estate investing.
Is Buying Land a Good Investment?
Now that you have asked yourself, 'is buying land a good investment?' it is time to move forward. That can be through purchasing the land you have been looking at, or by hunting for a new investment opportunity.
Regardless of your decision, we want to help you. That is why we want to offer you a free strategy call at the link below - to set you up with the best available financing regardless of your goals.