Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

5 Reasons Every Real Estate Entrepreneur Should Invest In Raw Land

Written by Paul Esajian

Have you ever dreamed of owning property that you could buy for a relatively low price and sell for more at a later date? What about property that requires virtually no maintenance? What if I said you could find such a property and close the deal without having to worry about any competition?

If you’ve been in the real estate investing business for awhile, or even if you are just starting out, you’re probably starting to get pretty excited about such an amazing investment opportunity. And no, it isn’t too good to be true.

The secret is to invest in raw land.

Raw land investing tends to get a bad wrap. There is a common misconception that undeveloped real estate is a pointless investment, or that it is boring, or that it doesn’t produce any income. However, the only people expressing such concerns are those who have never even gotten their feet wet in the raw land investing pool. The only reason someone wouldn’t want to invest in raw land is because they are uneducated on the process, but that’s easy to take care of.

I am here to help you gain a better understanding of exactly how to invest in raw land, and how you can turn it into your new specialty.

How To Invest In Raw Land That Is Right For You

raw land
The fact of the matter remains: undeveloped real estate has the ability to deliver the same consistent cash flow as any other type of investment opportunity, but with less of the headache. Unfortunately for our environment, but fortunately for investors, raw land is a limited resource, making it extremely valuable. It isn’t like more land can be created – quite the opposite in fact. Raw land can only be developed, which is where investors come into play. If you purchase land in an area that is headed towards development and growth, your land becomes even more invaluable; that’s where your raw land acquisition starts to produce some capital.

Regrettably, no investor has a crystal ball that can tell him or her where the next up-and-coming area will be. It is absolutely necessary for all investors to mind their due diligence and educate themselves on the market where they plan to invest, as a result.

The best way to predict where the next booming market will be, so that you can make your raw land investment accordingly, is to pay attention to market trends. Although there is no sure fire way to know whether or not you are right or wrong, it is safe to say that the real estate market is cyclical. A cyclical market moves in waves and has highs and lows. So if you can track these changes, you will have a better understanding when to buy. In regards to where, you must examine the recent development of your selected market. If there was a recent surge in development projects in the area, it is likely that buyers will be looking for land. It is also smart to look at the growth in surrounding markets. If there is expansion in markets that are in the vicinity of the market where you plan to invest, changes are, that development will branch out and eventually seize your market. Markets that are surrounded by growth are the best ones to take advantage of because investors are typically able to acquire a good deal and then sell high in the future.

Invest In Raw Land: There Is No Reason Not To

raw land investment
Now that we’ve briefly covered how to invest in raw land that is right for you, let’s delve into the exciting stuff: the benefits.

  • Investing in undeveloped land is great for the real estate entrepreneur who appreciates a “hands-off” type of investment. If you are sick of dealing with tenants, repairing property damages, and the myriad of other hassles that can accompany other types of real estate ventures, raw land will be your investment heaven. Vacant land is just that: vacant. In other words, once you purchase raw land, you can sit back and let it do what it does best: nothing. Investing in undeveloped land encapsulates the true meaning of “buy and hold.”
  • Another reason raw land is great for investors is the fact that there is very little competition when it comes to buying, selling, and renting vacant land. Most real estate investors have their hearts set on commercial properties, residential properties, rental apartment properties, which causes them to forget about raw land. This is unfortunate for those investors, but lucky for you, now that you are starting to see all that raw land has to offer.
  • Have you ever heard of seller financing? If you have gotten this far into this article, chances are you probably have, and chances are, you are probably a big supporter of it. The good news is that raw land investments give owners a lot more opportunity to exploit seller financing. Because traditional lenders (i.e. big banks) are often more hesitant to loan money for vacant land, you – as the owner of land – get to act as the bank. If someone is in the market for raw land and can’t acquire a loan, you can lend them capital but charge them higher interest rates. This is a win, win situation for every party involved.
  • If you don’t have available financing to purchase developed land, raw land is a great option because it tends to be far cheaper. When you buy raw land, there are no mortgage payments to be made, no utilities bills to worry about, and the cost of property insurance is far less compared to residential or commercial real estate. While some might argue that raw land investing is an advanced real estate strategy, it is actually quite the opposite. If a novice investor educates him or herself on the process of raw land investing, it can be cheaper to acquire and easier to maintain, both of which are ideal for beginners.
  • Arguably the biggest benefit of investing in raw land is its appreciation potential. Even in times of economic uncertainty, raw land is a hard asset. Because land is such a scarce resource – the quantity is so limited – it will always be valuable even if market conditions are rough. Unlike the stock market, raw land will always be needed, regardless if its economic value is gone. On the other hand, if the economy is thriving, the probability that your land’s value will appreciate is exponential. As land continues to be developed, vacant property becomes more and more rare, therefore becoming an increasingly hot commodity, especially if your land was purchased in the path of growth.

In summary, if you are looking for the ultimate buy and hold opportunity, it is time to invest in raw land. Raw land is low maintenance and has a number of advantages over other investing opportunities. Separate yourself from the competition and add a raw land investment to your portfolio.