Buying land for investment purpose is the niche of the real estate business for the deep pocket and long-term investors. At the later stage of the landlording career, the small landlord can diversify into such opportunities specifically for 2 reasons –
1. There is no regular attention required to maintain raw land investment which is what the landlord may look for towards the end of the successful career.
2. After holding and maintaining some rental properties, there is a good chance to have a large portion of equity accumulated in those properties. The landlord can also avail the investment required by selling those rentals gradually.
When someone has spent many years into the real estate field, he or she would have a better idea of a suitable location, where to purchase. Depending upon the availability and the amount of the funds, the landlord can acquire raw land and wait for the buyer.
Here are some popular strategies employed by experienced investors while buying land for investment purpose.
Don’t Go Alone
Whether you buy a partially developed commercial lot or purchase some acres for the investment purpose, it’s can be a good strategy not to go alone. The biggest uncertainty is with regards to the realization of profits. It’s challenging to get the land mortgaged compared to constructed real estate. You may come across unforeseen expenses related to regulatory clearances. That can consume your time and money. Not getting the desired result can frustrate you. In such circumstances, it’s prudent to have a group together to hold the fort!
Buy and Bring it to the Under-developed Status
As the city develops and expands, it needs more land to occupy. Some investor employs the strategy of buying a land and partially develop it. Depending upon the zoning in place at the location, the purchased land can be further subdivided into subplots for the developments like residential, multi-unit condos or commercial. Once all the regulatory requirement is met, can be sold to realize the profit.
The Cityhall can provide you with good information where the development is happening in your city. You’d also need a good professional to help you out with different regulatory permission.
Buy and Hold
As the name goes, buy the land for investment and hold it as long as you get the desired result. Again this strategy may sound simple but would taste your patience so better go with the like-minded and resourceful investor to share the risk.
Buy and Lease while You Hold
This strategy is for long-term investors. The idea is to buy the land which is a bit far away from the city, at a very cheap price. While searching, the investor looks for the lease options. After buying an investment land, investor lease it to create income. The options are to lease for agriculture purpose, billboard, cell phone towers, utility companies etc. to generate the rental income. The wind and solar farms are also becoming popular options. However, these options are for the investor who is looking for lease income rather than selling the land for profit.
Conclusion: Because of the uncertainty of the time-frame, the raw land investment needs extremely careful consideration by the investor. Hence, it’s not for novice real estate investor.
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