In an otherwise shaky economy, land ownership and development remains a dependable financial opportunity. Each different type of land investment features different challenges and benefits. Read on for a look into the unique qualities of some of the most popular options out there.
Different types of investments
Raw land (vacant, undeveloped land), though a limited commodity, is usually still cheaper than purchasing land which has previously been developed. It offers a less competitive market and more flexibility in regard to future possibilities. There’s also less upkeep and maintenance involved.
Many investors purchase their land with specific goals in mind, such as using it for agriculture or housing. Others hurry to purchase raw land while it’s affordable and wait for the area around it to develop before making any definitive decisions. Regardless, each category of land has different benefits and degrees of risk.
Subdivisions
Subdivision developments are a type of investment where the land is divided into different, smaller sections and multiple structures. The benefit of this is that it’s easier for each subdivision (individual sections) to be sold or developed for a profit, in comparison to one large piece of land. One important note: Each parcel of land needs to be properly connected to public utilities such as water and electricity, so it will be necessary to find out the costs for doing so.
Subdivisions makes it possible to sell to multiple buyers and pursue multiple development projects, for maximum profits. Subdivisions are most commonly associated with housing communities, but can be successfully employed for a wide variety of things.
Commercial land developments
This category includes all land intended to be utilized by for-profit businesses. Things like malls, auto-body shops, clothing stores and industrial warehouses, all fall under this umbrella.
As with any investment, we suggest performing due diligenceby carefully researching the area and speaking with local business owners. Learning the lay of the land will help determine what type of business project would be most profitable in that location.
As with subdivisions, commercial developments require city services such as accessible roads, sewage, gas lines, etc. We recommend speaking with local officials and worker crews to get a general idea of the cost of running these utilities.
Farmland
Recreational developments include projects such as camping sites, public gardens, or baseball fields, amongst others. This type of investment tends to be more of a long-term option, slowly appreciating in value over time.
A successful recreational development can increase the value of the surrounding areas, and has the added perk of being a place for the owner to personally use and enjoy.
Profit-generating strategies
Once the decision to invest in land has been made, it’s time to put some proven methods into action.
“Buy and Hold” is an investment strategy which involves waiting for the surrounding area to grow in value, which then correspondingly increases the value of the raw land. This method is ideal for investors who can afford to hold out for the optimal time to sell. Until that point, taxes, maintenance costs and insurance policies will still need to be paid up.
More active profit-generating methods, involve utilizing the land by leasing it out to local businesses or farmers. Many of them are interested in using raw land to run their operations, but don’t want to commit to buying it.
Whether you choose a long-term strategy or want to develop right away, land development is a worthwhile venture for both beginner and experienced investors alike. If you’re looking for professional assistance developing an effective strategy for your investment, call APX West today at 928-412-3570.
