We often hear of real estate tycoons building wealth with homes, apartment units, office spaces or new construction. Why??? Well, without a doubt the top reason is because of rental income. Having someone else pay your mortgage bill or giving you a primary or secondary income is quite intriguing. While this method has worked for some, it's not always as easy as it sounds. Hence the many commercials touting they will make you wealthy with real estate if you just buy their online corse. Interestingly, you only see these commercials in a healthy real estate market.
Investing in Land vs. Homes
Investing in Homes
While investing in traditional real estate methods like rentals, its not right for everyone. Here a few things to think about before investing in rentals.
- High cost to get started
- Collateral or large down payments needed
- High expertise of market conditions
- Can be time consuming
- Expect tenant issues and have Lawyers on hand
- Maintenance issues with the home
- Insurance needed
- Expendable cash for emergencies
A few things to consider no doubt, while it has worked well for some, it hasn't for all. But, if you want more information about starting with rental properties, this article from interest.com is good... Becoming a Landlord.
But Wait!!!! Have you considered investing in Land??
You may be thinking, well land doesn't make an income so why invest in it. To be fair, a lot of land doesn't make a rental income, but some do. We did an article on this if you're interested Ten Ways To Make Money on Raw Land. But there is more to it...
Many new and experienced real estate investors have had great successes with raw land. Before we go into why, here is a good story of how land is really thinking outside the box.
This is a true story and how investing in land works for them.
A lady, although experienced in land investing is making a living off of it in a very investing way. Yes, she does major homework, but it's nothing you can't learn as well. She became familiar with a particular state and county, which many investors do, both in land and homes. They focus on an area that really works for them. This lady found an area with just the right type of land for her goals. And she does this over and over, year after year.
She seeks out land in the range of $15k to $20k, but she looks for land heavily forested with particular trees. Before she buys the land, she secures a purchase agreement with contingencies based on due diligence. She then contacts a timber company and gets quotes on what they would pay for the timber. Once a price is worked out for the timber and the land. She then makes the purchase complete.
The timber company then clears the land to harvest the timber. She now has a cleared improved lot and sells it for much higher because it is cleared. In one case she spent around $20k and profited $100k in a matter of a few months. Very creative of her and she does it all the time now.
Investing in Land
Here are a few of the perks about starting with land investing. Just like home investing, there is a risk of the value not increasing or going down. So it can be the same in those regards, but here is what makes land investing different.
- Low cost to get started
- Little to no maintenance
- Low cost to hold
- Not time consuming
- No tenet issues
- Potential to still make rental income
- Highly creative and less competitive market
Getting started in land investing
Believe it or not, you can get started with land investing for very little, something you can't do with investing in homes. With well under $20,000 you can buy some nice land. Even get creative and make money off of it, like this lady does. Or use the methods in our other article above about renting out land.
The great part about land, even if you don't make rental income, is that you can hold it for very low cost. Usually just property taxes, which are lower for raw unimproved land. In some cases, you can pay about $8 a year to hold an acre of land. That would be $400.00 total to hold it for 50 years in the family. You would also avoid maintenance costs of course, something a home would need if you held it for 50 years.
You can also finance to own the land if you don't have a large amount to buy it in full. Several land selling companies offer this, so you can make a payment every month for say a year or two. You don't break the bank and eventually own the land outright. The perk, you don't need to access credit or a bank. Because land is usually owned outright and offered in financing by the owner or company. The same can be done when you decide to sell the land as well.
We hope this at least gets the wheels spinning for you and thinking a bit outside the box. Below are some FAQ we get as a land company if you are interested.
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Q: Is Land a Good Investment?
A: Real Estate, although with risks and economic factors can be a great investment. With raw land, there is potential to invest with less capital, flip for profit, hold for value or even make money renting the land.
Q: Is Land Expensive to Hold?
A: One of the best reasons land is a unique investment opportunity is the low cost to hold long term. There is usually no maintenance and lower property taxes compared to homes.
Q: Is Land Investing better than Stocks?
A: While the stock market and having a 401k it can also be wise to diversity your investments. World economic factors can heavily impact a stock portfolio. However land is inflation resistant will always be of value even in a currency crises.
Q: Where can i find cheap land for sale?
A: Some of the best states for cheap land are in Texas, Oregon, California, Arizona, Tennessee, Nevada and Washington. While you can find cheap land in all states. Some with be more remote than others and reflect this is the price.
Q: What states have the cheapest land?
A: Some of the states with the cheapest land include Tennessee, Oregon, Washington, Arizona, Texas, Nevada, Washington and California. The lowest cost land being found in more remote areas or desert landscapes.
Q: Can you get free land in the US?
A: Yes, many counties in the United States offer free land. However, this comes at a major catch. Often times the requirements are building a home on the land, living in it for a period of a time and time to build requirements.
Q: Is living off the grid illegal?
A: No, however this is a county by county decision as they set building requirements and rules. Living off grid is more common in remote areas as opposed to metropolitan areas.
Q: Is land considered an asset?
A: Land is considered a long-term asset and not a current asset. It is considered a longer term asset and not as liquid as other assets.