Vacant land may not be as popular a real estate investment as single-family homes are, but land has the potential to provide substantial returns. If you're interested in this less-known aspect of real estate, here are some tips on how to invest in vacant land.
Make Low Offers
The listing price for any piece of real estate isn't necessarily what you have to pay as a buyer, and vacant land sometimes sells for much less than what it's listed at. A landowner who's have held a parcel of vacant land for many years and not been able to sell it might gladly accept an offer even if it's well below what the current owner is asking.
In order to get land for less than what it's listed at, however, you have to offer less than what a seller is asking. Make low offers on land that you're interested in, and be prepared to have some offers rejected. What matters isn't how many offers landholders decline but what ones get accepted — and some will eventually be accepted.
Of course, purchasing at a low price is a foundational step in many vacant land investment strategies. Only when you buy below market value can you quickly sell for a profit.
Aim for Shorter Timeframes
One of the key factors you must determine when evaluating a piece of vacant land is how long you're likely to hold the land for. In general, you should aim for shorter timeframes rather than longer ones. Longer investment windows have two major downsides.
First, it's more difficult to project future value the longer you look into the future. While you might be able to reasonably estimate a parcel's value in one or two years, estimating value in 15 to 25 years is extremely challenging, if not impossible.
Second, holding vacant land comes with some overhead. You'll have to pay property taxes and may need to also carry liability insurance. While not too extreme, these costs do add up over time. The longer you hold a piece of land, the higher these costs will become.
Secure Revenue While Holding
In most vacant land investment strategies, the main purpose isn't to generate revenue while holding the land but rather to make a profit upon the land's sale. This doesn't mean you can't lease vacant land while holding it to help offset some expenses, though. Lease your land to farmers or hunters, and you can make a little while waiting to sell the property.