Wow, what a year 2020 was, one for the record books. Between the virus, economy and elections, I think many can agree, Good Riddance!
The Coronavirus greatly impacted the whole world in several ways. With lockdowns, mask wearing, toilet paper shortages, food being taken from stores and an unprecedented fast development of a vaccine. It almost flew by in a way due to all the chaos.
We don't know exactly what will play out in 2021, time will tell. But It should noted, we are looking at some unusual conditions going into the new year.
At the point of the article, the start of 2021, the stock market is at an all time high, Bitcoin is at all time high and the housing market is still high. Yet strangely, there are still many issues in the word and uncertainty.
So what does this have to do with land? Well, most people don't think about land as an investment. With everything at all time highs, this may be the year to invest in land.
Land Investing: Why 2021 May be The Year to Start
A Questionable Future
Do you really want to invest when everything is in an all time high state? Not exactly, the standard idea is buy low sell high. Yes, it could go higher but you are taking on much more risk.
The truth is, it seems questionable why things are thriving during such a crisis. Jobs were lost, local businesses are not doing very well and the government seems pretty reckless with printing money.
The economy may be in a euphoric state, but many people are not.
Financial experts have weighed in, in fact many expect 2021 to be a good year for the economy. The vaccine is out, GDP numbers are picking up and business are slowly reopening.
But we can all agree, even the experts, it is a questionable future. Especially when it comes to investing your money.
So why land?
Land is an unusual investing instrument that is mostly overlooked. This is because most think of it as dirt that you can't use. Traditional home ownership is the normal strategy for such investments, everyone thinks about that, but that greatly saturates the market.
The perk about land, the ownership cost is like no other, same as the possible ROI. It is an asset you own, just like a house would be but much different in many ways. Here is why...
- Land has zero to very little maintenance costs. With no structures or renter damage you can hold land without the headache.
- Property taxes on land are very low. This is because the counties assess unimproved land quite low, which reduces the tax rate to hold it. Some land you can hold in your portfolio as low as $5.00 a year. That is $250 to hold a property for 50 years. Assessed value is much different than market value so don't let that affect your decision on a parcel of land.
- You can actually make rental money on land, we will cover that more in this article because it's a great subject on its own.
- Land can have some huge returns. Cities and developments are ongoing but there is only so much space, so they must build outward for the most part. This means if you own land outside of a growing area, it will eventually catch up to your land. The less land available in the area, the higher your value goes up as it becomes more rare to find. Some people have made unreal returns on land, returns you would never get with traditional homes.
Land is Inflation Resistant, why this matters.
Yes, it's a complicated subject matter to understand. To put it as simply as possible for the sake of keeping the article short. Inflation is the decline in purchasing power of a currency.
While this currency purchasing power goes down, commodities go up. Land is a highly marketable commodity and an intrinsic part of the world community.
It's estimated that $9 trillion dollars was injected into the market during 2020. With this amount of money printed and put out, the expectation is the dollar will soon devalue and inflation will go up.
This is why commodities like gold, silver and bitcoin have gone up in 2020. Other commodities as well, but this is so far in people preparing a hedge for the future possibility of inflation.
Land is commodity, it is highly over looked as one though. In the event of a major devaluing of your local currency, land may a safe investment to diversify in. It can be sold in different currencies or even bitcoin.
Fire Sales, Taking Advantage of Liquidations
As often seen, fear within the economy causes people to liquidate extra assets. Someone might own a few homes, but they might also own some vacation homes and raw land.
During fearful economy conditions, these investors liquidate these extra assets, often times as fire sale prices before things get worse. And, as Warren Buffet puts it...
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
This was seen for a short while just after the march collapse. Major land holders wanted to sell in bulk for fire sale prices. There was this fear that they would be stuck with so many assets the bills on them would wipe them out.
The thing is, even though land holds its value as a good investment, some people are over extended and want to sit in cash. This is a unique opportunity for the buy low sell high strategy.
The opportunity was there, but don't think the deals have ended. There is still fear in the economy, some are willing to fire sale their property. You may not find these on Zillow, but you want to look for for the For Sale by Owner properties and highly underbid them to see if they bite.
Defaults Make Opportunities
You have probably heard a lot of talk about people not able to make rent payments. While this is awful for a landlord, the government has put protection against evictions for the people. This protection will be coming to an end.
It's a sad scenario actually, people may have a mortgage already and depend on their rental home to have a renter for paying the mortgage on the property. Issue is, the government supports the renters but not the home owner. While banks gave some room for no payments, that didn't last long. In turn, we may be looking at a default wave soon as many are behind in payments.
While this mostly goes for homes due to the large mortgage payments, it can happen with land as well. With land, someone may just not make payments anymore and let it go. There are no real repercussions letting land go, at least when it is owned outright. When it is owned outright, the county simply takes it and sells it at a tax sale to get their taxes owed to them. The owner loses it, but their thinking is, now I don't have another bill I have to pay.
Tax sales, whether it be homes or land are not for the inexperienced. You really should have the skill of doing title searching, looking for chain of title and liens especially. Also each state operates their tax sales with different rules. You could end up buying something that causes you to pay off a lien that isn't even yours.
If you don't have these skills, you would need a title company to run reports. It doesn't make sense to do this because during an auction, some properties will sky rocket. You would need around twenty title searches in hopes to get one property, even then, you might not even get one property if the bids go too high. A title search might run you $200 a pop, you would also need to know how to interpret it.
While you can learn these things and do tax sales, it's harder than you think and takes people years to learn. Just watch some of the experienced people on YouTube, they have major horror stories and many quit after getting burned.
You can take advantage of defaults still, without knowing these things. If someone is selling a property and you see a few years of non payments searching the property in the county. Chances are they will take much less than asking price. This is because they received default notices and will lose it anyway. It will take some research and time, but you may get something below market value after the hard work. With a case like this, you're property the only buyer and can purchase just one title search.
Remember, the housing market is pretty strong still. But keep it in mind, these defaults may be coming in 2021.
Land Can Create Secondary Income
The misconception is that land just sits and money can't be made on it. Depending on where your land is located and how creative you are, this is not the case.
Remember, land doesn't have much maintenance cost and chances are you will own it outright. You won't have overhead like home upkeep, emergency repairs and mortgage payments. So if you can make money on your land, the profit is yours.
Here is how to do it...
Rent Your Land on Holidays - If your land is in a good location, you can rent it to those selling Christmas trees or Pumpkins during the season. If you have the time to set up and run one of these too, the profit is wild. I have heard of these guys pulling in $20k a season. Also, if it is remote and you can grow these items, these buyers will pick them up in bulk from you.
Farming - You don't really have to be a "Farmer" per se, there are crops you can grow on land for extra cash. Organic farming and organic markets can make you some nice cash on the weekends. It doesn't take much land at all to bring in a weekend supply of vegetables to a small market and sell it.
Paintball Recreation - Ridiculous right? Nope, here is a true story. There is a guy who purchased about 5 acres of land that was really remote, about two hours from Los Angeles, middle of nowhere. This type of land is one we would probably sell around the $7,000 to $10,000 range knowing the area. He brought in junk yard type stuff, old broken cars, rusted barrels and even built some broken war like buildings. He ended up making about 7 zones, each zone was a different type of environment you would find in war.
As they say, if you build it they will come. Over the years his place grew to the point where around 100+ people a day would show up to have paintball wars. He would also rent guns and set up shop to sell paintball supplies. A few employees would run the shops and control the rules of the paintball wars. This guy was making serious cash on land that cost him hardly nothing. Pretty creative right?
HipCamp - I take it you have heard of AirBnb? Well HipCamp is the AirBnb of camping. If you own raw land, you can charge people to use it for camping. It really doesn't matter where it is, these are available all over the United States. Obviously the more attractive the spot the more you can rent it for. But like many, they don't live on the land and just give GPS to it. The smart ones grade the land and set up some amenities. Things like a fire pit, table and even some solar lighting. You can even put a trailer on your land and use that as a rental on hip-camp. Some even do large tents and put a bed in them, although you may want to live on the land if you do that.
We certainly hope 2021 brings some normalcy and stays in a recovery state. While the future is uncertain, having diversification in your portfolio is always a smart strategy. One of the most famous quotes when it comes to land is this.
"Buy Land, They're not making any more of it" - Mark Twain
Where else can you say that?