Land investments have consistently been viewed as a smart investment, and this remains true even during tough economic times. However, land investment is frequently overlooked and misunderstood by beginning investors. This is unfortunate, as land investment offers benefits and flexibility seriously lacking in other financial assets.
Advantages of purchasing raw land
“Raw land” describes any land which is undeveloped and vacant. One of the biggest positives, is how surprisingly affordable it can be. Because there’s a lot less competition, the price is lower than other types of investments, and insurance rates and property taxes tend to be correspondingly low.
These low costs allow for investors with limited budgets, to purchase raw land and hold it until they’ve saved enough to develop. Doing so also avoids the possibility of the buyer losing their opportunity to purchase, in the case that the land sees a significant price hike.
Raw land is also comparatively low maintenance, making it an appealing option for inexperienced investors. A popular investment method is the long-term “buy and hold” strategy, which allows the land to gradually appreciate in value in response to the location around it rising in value. Then the investor can choose to either sell or develop for a profit.
Key things to consider before buying
Location
The closer in proximity the land is to high population regions and urban centers, the easier it is to find additional funding and qualify for loans. Land in these areas also has a higher price tag, but once purchased, will gain value quicker than rural land does.
Utilities
Any future developments will need to be connected to public utilities such as water and sewage, plus be accessible by road. The chances of having public utilities nearby in rural areas, is much lower, so this is something to keep in mind. The cost of connecting the land to public utilities will need to be carefully researched and factored into the budget before purchase.
Zoning
Zoning is what ultimately determines the types of developments and legal usages allowed. Try to find out the zoning laws as early as possible, that way the development project can be planned accordingly. Sometimes the government will rezone vacant land which has already been purchased, which can cause a beneficial spike in value for the owner.
The history of the land
If a deal seems too good to be true, it probably is. We strongly recommend researching the average equivalent land values in your location. If the price is significantly lower, it’s possible there may be industrial contaminants, protected wildlife, etc., on-site. Such issues would require extra finances and legal efforts to address.
Budget and expectations
Raw land is viewed as more of a long-term option, rather than a quick turnaround. Larger pieces of land in particular, can take a long time to sell and grow in value. For those looking to develop, there are also additional costs and responsibilities that go into it.
At APX West, we know the ins and outs of land development. We provide consultations and guidance services aimed at helping our clients grow their personal portfolios, to help them make the most of their investments. If you’d like to learn more about land development in Arizona, contact us at 928-412-3570.
