Property investors are often so focused on finding the perfect property that they can overlook the potential of investing in vacant land. Investing in land means a very “hands-off” investment strategy; an investment strategy that usually involves little competition and highly motivated sellers. Here are ten reasons why you shouldn’t wait to add land to your investment portfolio:
There’s Nothing To “Do”
Some investors find out the hard way that once they purchase a property they suddenly have to become a contractor, interior decorator, architect, and professional rehabber. If these are not necessarily your strengths, owning property and flipping it for resale can be a daunting task. With land, there’s nothing to build, nothing to design, and nothing to repair. You simply buy the land and wait to sell it to somebody who does possess these skills. Buying land requires 0 DIY skill; which is why so many first time investors are drawn to this strategy.
Little Competition
If you’ve spent any time in the real estate world, you know how frustrating it can be to deal with stiff competition and being outbid on a property at the last minute. When investing in property, one missed call or delayed email can mean a missed opportunity. With land, there is a smaller pool of competition. Because so many investors only focus on what they know, (apartments, homes, townhomes) they’re not competing for the raw land that you’re interested in.
Highly Motivated Sellers
The difference between people who are selling land and people who are selling a building is an emotional connection. Most owners aren’t emotionally connected to their land, which makes it easier for them to sell. Land sellers are often absentee sellers, and because they don’t live near the land, use the land, or profit from the land, are usually highly motivated to get it off of their hands, even if that means selling it for pennies on the dollar. This, combined with limited competition for land, is one of the main reasons investors can maximize their ROI so quickly when it comes to buying land.
Inexpensive Long Term Investment
When you own vacant land, no one is going to call you in the middle of the night to report an emergency pipe leak or other expensive home maintenance repair. You’re not going to need to put $15,000 into a new roof unexpectedly, or worry about tenants who don’t pay. Because you’re not paying mortgages or utility bills, land can be an extremely inexpensive long-term investment. Some investors choose to add property insurance on to their lot, but it’s not required.
No Depreciation
What happens if you buy a single-family home and then something drastic happens with the market and the home significantly drops in value? This is a very real issue that many property investors have to think about. Land is land, and as Mark Twain once said, “they’re not making any more of it.” Land is a tangible and limited resource that does not depreciate and does not ebb and flow with the current real estate market.
Versatility and Options
Land is versatile. It is something anyone who plans on building anything will need to get started. Without a specific type of building on it, you can sell your land to any kind of buyer. Owning land allows investors to have more options than owning a limited-use building.
Easy To Buy
Because there are no buildings to inspect, buying land can be much simpler and faster than buying an actual property. You can do most of the research you need for free, online, and never have to actually see the lot. Buying vacant land usually doesn’t require a large loan from a lender, which means you get to skip the part of the investment process that involves piles of paperwork and weeks of waiting. Most land purchases are made through a private seller process, and some offer flexible financing options so that you can afford to invest in land with almost any budget.
Provides Freedom and Peace of Mind
Owning land offers investors peace of mind that they have a valuable asset that they can do a lot with. They can build a second home on it, leave it in their will as part of an inheritance, or use it as an outdoor storage space. The options are limitless when it comes to what can be done with the land once you own it. There is also a sense of security that comes with owning land. It’s a valuable that can’t be stolen or easily destroyed.
Fewer Government Regulations
One of the first things that investors will learn when buying property is that some extensive laws and regulations must be followed carefully for a transaction to be complete. Most real estate investors work closely with lawyers to ensure they are up-to-date on all of the legalities that are involved with this type of investment. With land, there are far fewer regulations to adhere to. Many of the laws that apply to buying real estate do not apply to vacant land.
Affordability
Compared to developed land, vacant land can be a more affordable investment strategy. As we mentioned before, sellers of vacant land generally are very motivated and willing to sell the lot at a reduced rate. These factors, combined with flexible financing options for land buyers can make vacant land and affordable asset for investors.
While there are many differences when it comes to buying developed land vs. vacant land, one thing do have in common is that in order to get the best deal and find the property that best suits your lifestyle, you need to work with a real estate professional. Experienced real estate professionals have access to an extensive network of motivated sellers and can help you find the vacant land that is perfect for your next project.
If you’ve been thinking about adding vacant land to your investment portfolio, contact a Jovi Realtor today. We can help you scour the market for the perfect lot for your next big adventure!