Investing in Land: What are its Risk and Benefits?

You can find a lot of ways to generate money by investing in land. Despite the erroneous assumption when it comes to putting your money on a piece of a vacant lot (that it’s a weak investment and such), the benefits that you can get from this type of real estate investment are substantial. 

Photo of land in Kentucky

However, an investor like you must know how to do your land investing right, especially if you don’t have enough experience. Aside from the advantages, you should also be aware of the risks associated with investing in vacant land. Read this blog post to learn more. 

Benefits of Investing in Vacant Land

Investing in an empty piece of land can be a lucrative investment as long as you pick the right property. Here are some of the potential benefits to convince you to start investing in vacant land. 

1. Investing in Vacant Land is a Hands-Off Investment

Owning a piece of vacant land doesn’t require you to deal with leaking roofs, broken toilets, lawn care, pipe leaks, and other problems associated with holding a home for rent. Moreover, you don’t have to deal with tenants! So, if you want to have peace of mind, investing in vacant land is a good choice. 

2. There’s Not Enough Competition

Buying a home can get you into such tough competition with other buyers. So, if you’re tired of competing with many homebuyers, it’s an excellent idea to have a detour and purchase vacant land. 

Not many people are into vacant land investing. Most real estate investors are interested in buying commercial property, apartments, and homes. That’s why this is a great opportunity for you to start investing in an empty piece of land because there are more chances of closing the best deal with the land seller. 

3. It’s Easy to Purchase Land with Your Own Cash

There are land sellers who can give your great deals when you buy a property from them. When you find one, you can buy vacant land using your own money without having to apply for a mortgage from a bank. Just make sure that you know where to purchase vacant land that only needs affordable start-up capital. 

You can also purchase smaller pieces of land. The good thing is that insurance, taxes, and upkeep costs aren’t very expensive. 

4. It May Increase in Value Fast

The market value of a vacant lot appreciates in a slow-paced manner. But, sometimes, the government will rezone the area and this drives investors to purchase. In this way, the price of your property will skyrocket and you can put it on sale to interested developers. That’s a significant profit straight to your pocket, for sure! 

5. It’s on You How to Do with the Land

Once you purchase a vacant lot, you just let it sit there until its market value appreciates. You can decide to build a structure on it or sell it to willing buyers if you like. That’s how versatile to own a piece of vacant land.

Risks of Investing in Vacant Land

You must identify the red flags of a piece of vacant land before you purchase it. Here are some of the common drawbacks you need to be aware of when investing in vacant land. 

1. Zoning Problems

One big issue when you’re buying vacant land is zoning. Zoning is important because it determines how you can use the land. Each town has a plan for land use imposed by the local government. For example, a town can be zoned into industrial, commercial, agricultural, residential, or mixed-use areas. 

Let’s say the land you own is located in a commercial zone, you can’t build a residential building in it. But you can petition the town for reclassification so that you can build a residential house on the land. 

2. Issues with Utility Access

Getting access to electricity, running water, sewer, internet, cable, or telephone can be difficult if your land is in a far-flung location. For example, if the land doesn’t have access to a sewer line, you need to spend money for a percolation test to ensure that you can install a septic system in it. 

If you’re looking to purchase a vacant lot, make sure that it’s not so far away from the city. In this way, there are higher chances that you have ready access to utilities. 

3. Environmental Issues

Another problem that you may encounter when investing in a land property is that you don’t know what lies underneath the soil. It could be that the soil has high levels of asbestos, radon, or expensive to clear rock. If that’s the case, it’s not good for building a structure in it.  

Some areas are also prone to flooding. So, you really need to pick the right property if you’re going to invest in vacant land. 

Takeaway

Investing in vacant land can have its risks and benefits. It’s crucial that you know both of its upsides and downsides to ensure that your investment can generate a significant profit. When looking to buy a piece of vacant land, you have to choose the right property for that purpose.