Remember how I said that location is of utmost importance in house buying, or real estate in general? Yup, same goes here…. only difference is that unlike developed properties, buying vacant land is often seen as a harebrained scheme.
Land investing is actually an extremely lucrative business. If you know how to maximize the value out of your bare land, you have a cash cow at your disposal. Keep land topography and zoning at the top of your checklist.
Which is not.
Here are some of the advantages of buying land:
Advantages of buying land
Now let me tell you the advantages of buying land, and why it is NOT a harebrained scheme:
You can do anything with it, build anything on it, in any way you want (being in the zoning limits, of course).
The main thing to keep in mind before you even go land hunting is the zoning and land restrictions. You might think that a stetch of green land is useless for building dwellings upon, but did you think of any other use for it?
You can buy a vast stretch of land and never realize that there are minerals inside that soil which can be used as leverage.
You can buy a stretch of woodland and never realize that the timbre in your parcel can bring it loads of business like never before.
It all depends on how thoroughly you do your homework and how flexibly are you willing to leverage the highly coveted natural resource.
Think about it – When you are buying apartments, you often see them piled on top of another IN THE SAME PIECE OF LAND. Which means that even if the world were to end tomorrow, your 1000-acre land stays 1000-acre land, irrespective of a 1000 flats being built over the same 1000 acre land.
Another subset of scarcity is that nobody wants land which cannot be built on. A majority of people who think its stupidity to invest on vacant land are those people who cannot think beyond the raw elements.
There is a lot of vacant land which you cannot build a house on, but can be used as community park. Or even a golf course. Or even plain parking lots. Good lord, have you any idea how having a little parking lot can bring in passive income in ways you’ve never thought of??
3. Highly profitable
When something becomes scarce, only the rich people or companies can afford to purchase it. Which means that if you were to wait for your land to turn profitable, and then sell it, you gain a bulk of passive income.
The main reason why land can be highly profitable is because you’ll find many land sellers very motivated to sell at even 0% profits. This is because once you buy land, you don’t get immediate passive income from it, unlike a ready-made flat put on rent.
But if you have the right mentality and tricks to increase the same land’s value with minor adjustments, then you can sell that land at a higher rate – hence, profit.
Not many people know it, but buying raw, vacant and undeveloped land is much much cheaper than buying a developed land with roads, buildings and sewers. Which means greater possibilities of finding great deals
Remember about why I think land investment is highly profitable? The same thing counts here. The land owners who put their plot of sale are willing to just get rid of the land since the annual tax rates are way too damn high for them to pay!!
5. Low maintenance
Your land will not wail for attention. Your land will not contain noisy or dirty tenants, leaking roofs or overflowing toilets. Your land just sits there and does nothing to ruin your peace of mind. You just need to fence it and occasionally keep the natural vegetation low…maybe twice a year?
And since raw land is much more affordable than developed properties, you can almost always pay it off with cash.
And if you can pay it off with cash, it means you’ll have no mortgages to worry about.
Buying land for investment (Land buying checklist)
Now that you have gone through the advantages of buying land, and thinking of buying land for investment, here are the things you must look out for first:
1. The zoning
Zoning is a way of you being told what the land is best useful for and what can or cannot be done on it.
There are different zoning classifications within every municipality, however vague they may be. You’d just have to call your local city planning department and ASK.
They’ll be the most authentic source to tell you what the land can be best used for within the land usage restrictions.
You need to know if the soil is suitable for building in the future. Maybe you aren’t gonna build on it, maybe someone else in the future will…But a land with soil which can be used for construction is always something people are willing to bet on than an awkwardly shaped and positioned land plot on an inclined plain.
Topography matters in a huge way, that the basic topography of a plot may be the breaking point of your land investment.
Simple example: Large, flat plots of raw land are very suitable for building; while areas on mountain sides are both susceptible to floods and tricky building foundations. Which means land development would take somewhat longer time than it would normally take on flat plains, which in turn means that the value of your land will appreciate at a slower rate when compared to flat plains.
3. Public Utilities
What pubic utilities can you see from your plot of land? Do you see any phone lines? Gas lines? Water lines? Power lines? These public utilities are basically unlivable without, and even though you aren’t planning to build on your land, the absence of these lines can substantially decrease your property’s value in the market
Maybe you are gonna use the raw land as a windmill farm, or even a solar panel farm. Granted, that harnessing these natural resources can be of great value for both you and the nation, even the initial requirement of building one requires power. And once there is power, you need someone to maintain these farms. So phone lines, water lines become a necessity.
4. Flood zones
If you have water source nearby, then check how much water can reasonably expected on an extremely rainy day. Are there hills nearby? Are you on the downhill or uphill area? Will your front door be lined up with water when you step out on a rainy day? What is the quality of the soil? Is it construction-worthy soil?
A flood zone land can be very expensive to insure, and you cannot possibly think of investing more than what it’s worth.
5. Shape and size of parcel
I know that if you getting 1000 square yard raw land at a great bargain, you wouldn’t wanna miss it. I mean, a couple of years later and it’ll come at a great selling price, right?
The thing about the size and shape is that AFTER you have check the zoning and land restrictions, you need to know if you can build anything at all on that soil!
For example, you find a small parcel of weirdly shaped land which isn’t under flood zone and the topography is great too. You find out that the soil is built for buildings and the percolation test is upsy daisy as well.
But then, you find out that the land zoning department has a list of building setback requirements, and when taken into consideration, turns out whatever space you’ve got left is of no good.
Yup. These are pretty much the things you need to keep in mind before you buy land as an in vestment, so be careful and gather as much information of the topography, zoning requirements, and if required, hire a team of specialists to know what would be the best way to put that raw land into use.