The problem with finding investments these days is that they can be very difficult to predict. You might think that you are working with a surefire stock on the market but the values of stocks can be rather volatile and unpredictable.
Also, while the commodities and the foreign exchange markets may sound attractive, it is even harder to figure out where those markets will go. They might actually be more risky than stocks when you consider how much technical information and guesswork is involved.
So, what should you consider when trying to find an investment? You can always consider investing in land instead to add a less volatile asset to your portfolio. More and more investors are turning to vacant land which can be found in many parts of the country and can be rather easy to afford.
So, why would you want to invest in vacant land? Well, there are several good reasons why. Like every investment, there are pros and cons, but owning land is a long standing investment vehicle that is more versatile and easy to acquire than many people realize.
A Hands-Off Investment
When you invest in land, you won’t have to do anything with that land. You don’t have to worry about maintaining or managing anything in particular like other forms of real estate investment.
This is much easier to handle than managing real estate with structures and tenants. While rental properties (whether residential or commercial) are often good investments, they are more akin to owning and operating businesses than a passive investment. With raw land you have the opportunity to invest in an asset that often appreciates over time without needing to manage any day-to-day business operations.
A Good Store of Value That Can Be Enjoyed
Given that land is a scarce asset and every parcel of land is unique, it acts as a good store of value. The quote ‘buy land, they aren’t making any more of it’ comes to mind and is one of the driving forces behind why land is a valuable asset. The difference is, that unlike other traditional assets that act as a store of value, such as gold, you can enjoy your land in a variety of ways.
Recreational activities such as camping, hunting, fishing, off-roading, etc put land in a unique category of an investment vehicle that can also be a lot of fun! Stocks and bonds have a place in most investment portfolios, but they are effectively just numbers on a screen. Being able to ride ATVs or hunt on an investment in your future is a uniquely satisfying experience.
A Long-Term Option
Long-term investments are often better to have in that they can work over an extended period of time. They may also be a little more stable and can provide you with a greater profit potential. Also, you get more beneficial tax treatment if you hold investments for the long term, preserving more of the profit you have earned.
A land investment is the perfect example of a long-term investment. With this option, you will have the right to hold onto that land for years to come without worrying about anything being too old or otherwise hard to use.
Land in areas that are growing tends to appreciate over the long term. Many people have held land over generations and have seen significant gains in value over time.
Opportunity to Add Value
With this investment, you can always add improvements such as buildings, fencing, a new pond, roads or other other items. You can also do less tangible things to the land, such as subdivide it, have it surveyed, or change the zoning, all of which can significantly increase the value of your investment.
This is the entire business model of many successful investors. They purchase raw land at a discount and then add more value to their investment by doing the above mentioned items. There is, of course, no obligation for you to do these things to your land but it is a unique amount of control over the value of an asset that doesn’t exist in many areas of the investment world.
There isn’t anything you can personally do to increase the value of a share of stock you own. It is up to the management team to execute on a strategy and the market to value those shares. In that sense, when it comes to land, you have much more control over the value of your asset.
Many Ways to Monetize Your Land
While it is obvious that you can always sell your land for all cash in the market if you want to monetize your investment, many people don’t realize that you can make land cash flow.
How you may ask? There are no buildings where tenants pay monthly rent, right? So how do you get cash flow out of raw land? The answer is found in a little bit of financial engineering. Instead of selling the land now for all cash, you can offer owner financing where you’ll create a note (a loan) where the buyer will pay you monthly over time with interest.
Given there is a lack of traditional financing available in the raw land market, owners have the ability to increase their pool of buyers by offering financing options. As an investor, you have the opportunity to sell one or many of your properties with owner financing and create passive income streams with the notes created.
And because there won’t be a tenant on your land, the monthly payments come in with a lot less hassle found in traditional rental real estate. There are no toilets that get clogged, heaters that go out, or windows that get broken when it is raw land so no need to worry about calls in the middle of the night to have things fixed.
Ability to Invest from Your Computer
Given the availability of free satellite / mapping software such as Google Earth or Maps and the online data available from counties, many investors buy raw land around the country without having to physically go see the parcel. You can always visit the parcel using the GPS coordinates provided by the county, but many people decide to skip that step or have others visit it and take pictures.
This makes it a lot easier to invest out of state relative to other forms of real estate. It is, of course, a lot riskier to buy a single family home sight-unseen given all the potential issues and is not recommended. Given there are far fewer variables with raw land, it is easier to invest from afar.
We wrote an article on land research to give you a good start on your due diligence process.