7 Things You Need To Know About Land Investment
Undeveloped land investment is one of the riskiest speculations you can make. Most financial advisors counsel against land purchases for independent investors but if you have money you will not need anytime in the near future; go ahead and purchase land. On the other hand, land purchases can give you access to future development, a place to build your own home, and a hedge for the future. When purchasing land for an investment, do make sure you know what investing in land entails.
1. Since raw land generates no income there is negative cash flow associated with land purchases. You purchase the land and either build on it or hold it for speculation.
2. Land is considered indestructible so no depreciation expenses are allowed for land investments on tax reports.
3. Investing in raw land often requires employing land investment companies for their expertise in finding, buying and contracting for land purchases. These types of real estate companies can help you thorough the pitfalls of purchasing land and give you advice on the history, possibilities, and value of the land you are seeking to buy. Do be aware that they will charge a large fee for their services.
4. Land values appreciate slowly, or they can rocket upward overnight depending on the location and type of land investment you have made. For example, after World War II land was available in an unknown mining town for under $300 an acre. Thirty years later the land in this now booming resort town was worth $300,000 an acre and the selling price for a parcel is currently over $1M. Good investment for the future if you have the capital investment.
5. You can also find land for sale by owner by driving around, looking through sales brochures and speaking with land agents. Owner negotiations can be varied according to pricing and terms. When you purchase land from a private owner you will need to enter into a land purchase agreement, find financing, and investigate development possibilities. As a single investor it may be advantageous to purchase property that already has development possibilities. This could include an existing subdivision with houses already under construction.
6. Land speculation is a land investment tactic where the speculator or investor hears rumors of growth, develop or change coming. The rumors and speculation will drive the price of land higher and a profit can be made on the final sale.
7. If you are truly a land speculator, want to buy rural lands, and need a return on investment that is quick, investigate cattle ranches for sale. There are literally hundreds of working ranches with proven investment returns that can provide you with a decent income for years. For example consider an investment in the Arapaho Ranch in Nebraska that has a total of 11,485 acres of land either leased or deeded. Gorgeous meadows, pine forests, and a sorting pen for working cattle. Investment companies are generally interested in this type of purchase and it can be bought through a professional land company.
Investors who are interested in land investments need to remember that land cannot depreciate, the cash flow may be years in the future, and there are definite purchase agreements and rules that need to be investigated. If you are seeking land to build your own home, you can use the land itself as a down payment which makes this type of land purchase a good investment.