Basics of Land Investing

Are you tired of all the inconveniences that come with real estate investing, like tenants and structural repairs? The landlord life is not for everyone, and it’s getting old for you, it might be time to try something new.

Land investing provides a variety of profit opportunities. Whether you choose to invest in farmland or property for development, such as vacant lots and raw land, there is money to be made in land. Whether you want to develop an unoccupied property or purchase agricultural farmland, real property investments can create long-term and dependable revenue streams. 

Basics of Land Investing: overhead shotTips For Investing In Development Property

If you’re interested in taking the development route, here are a few tips and tricks to follow when investing in your first tract of raw land.

Location, Location, Location

As a savvy real estate investor, I’m sure you know that it’s all about location. Whether you’re buying a new rental property, a home for your family, or a vacant lot, location is one of the most substantial contributing factors to a property’s investment value. 

While you can usually improve or change the property itself, you’re stuck with the neighborhood where it’s located. For this reason, you should never forget that you aren’t just investing in real property; you are investing in the location as well. When you have found a property you may want to purchase, check with a commercial real estate broker to learn more about the site and surrounding areas.

Zoning Laws

An unavoidable aspect of land development is local zoning laws, limiting the way you can use it. For instance, if you buy a property that’s zoned for residential use only, you can’t build a strip mall or a factory on it. It’s nearly impossible to change the zoning for a tract of land, so you should always make sure the property’s zoning corresponds with your development plan before you buy it. 

Environmental Site Assessment

In addition to zoning and the surrounding area’s qualities, you should always investigate the land itself by conducting an Environmental Site Assessment (ESA). An ESA consists of four evaluation phases that will confirm whether the land can actually be developed according to your plan.

Utilities And Easements

You’ll also need to check with the local utilities about the process for setting up the electric, water, and sewage. If you have to cross someone else’s property to access the land, you’ll need to obtain an easement before you can start developing the land.

Cost Analysis

While you are probably already familiar with the costs associated with real estate investment, it can be more expensive to get started when purchasing land. First, since banks consider vacant lots to be riskier investments than real estate, you’ll likely see higher interest rates than you’re used to with traditional mortgages. To save some dough on interest, it helps to put down as much cash as you can. 

Here are a few other back-end expenses to consider: 

  • Building and set-up costs
  • Insurance
  • Legal fees
  • Service fees 

farmland agricultural landTips For Investing In Farmland

The American economic system was built on agriculture, and farmland remains an integral part of our economy and cultural heritage today. As one of the least volatile types of real estate, farmland is also a stable and relatively low-risk investment method. 

The primary reason that farmland is such a low-volatility investment is simple: humans need food. As long as we rely on farmers to grow our food, there will be money to be made investing in agricultural land. Additionally, farmland will always retain value because it is a limited resource: there is a finite amount of land suited for agriculture. For this reason, farmland is rising in popularity among real estate investors looking for long-term and steady gains.

Returns from Farmland

Strategic farmland investors can see dependable returns from both the appreciation of the land value and the income made from agricultural activities on the farmland itself. While agricultural land may appreciate more slowly than typical real estate investments, you can realize short-term returns through direct income, either by renting to a farmer or operating the farm yourself.

Tax Advantages

Agricultural properties come with a variety of tax advantages that make them an even more attractive investment. Here are a few ways the tax laws can work in your favor when purchasing farmland:

  • You can lower your tax obligation by claiming depreciation on some crops.
  • You can deduct the costs of building or improving the property from your gross income.
  • You can receive favorable tax rates from state policies prioritizing farmland. 
  • You can place your property into a conservation trust or donate an easement to one, creating substantial tax benefits. 

Funding Options

You don’t need to have piles of cash to invest in farmland. Here are a few creative ways to finance an agricultural land purchase if you’re not rolling in dough:

  • Raise capital through a real estate crowdfunding platform like Fundrise.
  • Form a partnership with other investors to purchase the farmland together.
  • Passively invest in a portion of a farm’s operations.

Do Your Research

Whether you want to check out development land or farmland, it’s essential to do your due diligence before diving in. If you do your research to make smart property choices, land can be an excellent investment and an exciting diversion from standard real estate. 

 

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