Land Investing: Make A Living From Property

Investing in land is a great way to expand your wealth and diversify your portfolio. While buying raw land can be a risky investment, there are several ways to make money from it, including leasing it for agricultural or commercial use, or developing it for residential or commercial purposes. The best approach depends on factors such as location, zoning regulations, and your long-term goals.

When investing in land, it's important to do careful research to understand the investment methods and spot any hidden risks. Additionally, it's crucial to have the financial sustainability to take on risks and become familiar with the local real estate market.

There are different types of land investments to consider, such as commercial and residential land, row crop and livestock land, and mineral development lands. Each type has its own set of benefits and requires a certain level of knowledge about the market and sufficient capital.

Overall, investing in land can provide long-term productivity returns and is a relatively safe and profitable option for those seeking to build wealth.

Leasing land for short or long-term uses

Leasing land is a great way to make a living by investing in land. There are several ways to go about it, and the best approach depends on factors such as location, zoning regulations, and your long-term goals. Here are some options for leasing land for short or long-term uses:

Short-term land lease

Short-term land leases are typically owned by the government and are leased out for a short duration, ranging from one to five years. These leases are often used for agricultural or recreational purposes and come with restrictions on usage. Building on this leased land is usually not permitted, and the lessee is not entitled to compensation from the lessor in case of termination.

Long-term land lease

Long-term land leases, also known as long leases, grant the lessee the right to hold and use someone else's real estate for a fixed or unlimited time, often several decades. The lessee can use the land as if they were the owner, unless otherwise stated in the deed of the long lease. This type of lease is commonly used by the government to regulate land use, encourage house-building for those who cannot easily afford land, and ensure a fixed annual income. Long-term land leases can be terminated by the lessee unless stated otherwise, while the lessor can terminate if the annual payment is not made for two consecutive years or if there is another severe breach of contractual obligations.

Ground lease

Ground leases are a type of agreement where a tenant is allowed to develop a piece of property during the lease period, after which the land and all improvements are returned to the property owner. These leases typically last for 50 to 99 years and are commonly used in commercial real estate. Tenants who cannot afford to buy land can build property through a ground lease, while landlords benefit from a steady income and retain control over the land's use and development. Ground leases are advantageous for tenants as they do not require a down payment and allow them to build on property in prime locations. However, tenants may face restrictions on the use and development of the property, and the costs associated with the ground lease process can be high.

Buying and selling land for profit

Overview

Real estate is a profitable investment, offering dual income through rentals and long-term property appreciation. Land, in particular, is a good investment because it is subject to an increase in value, has low tax rates, and can be used for a variety of activities that generate passive income.

However, buying raw land can be a risky investment because it may not generate any income and may not result in a capital gain when sold.

Strategies for Buying and Selling Land for Profit

Flipping Land

Flipping land involves buying a parcel of vacant or raw land at a low price and then selling it at a significant markup. This strategy can offer incredible returns, relatively easy deals, cheap funding, and very little competition. However, it is an active business that requires marketing, negotiating, and managing the sale process.

• Identify promising areas for purchasing land at a reasonable price by researching local real estate markets, demand, and factors such as population growth and infrastructure projects.
• Buy a parcel of land that will allow you to make a reasonable profit.
• Conduct due diligence on the property to ensure there are no liens and that the title is clear.
• Market the land by highlighting its best features and potential future uses. Use online platforms, real estate agents, and other marketing channels.
• Sell the land to a potential buyer, negotiate the terms, and complete the closing process. Subtract the acquisition and selling costs from the final selling price to calculate your profit.

Residential Lot Flipping

This strategy involves finding an empty lot zoned or subdivided for residential development and then selling it to a development investor or builder.

• Find an empty lot with potential for residential development that is already zoned or subdivided.
• Purchase the land using your own capital or buy the contract for the land, which gives an investor the right to purchase it.
• Sell the land or the contract to a development investor or builder.

Land Banking

Land banking is a long-term strategy that involves holding onto raw land until the market conditions are right for selling.

• Locate the right piece of land by researching areas with high future development potential, considering factors such as population growth, infrastructure projects, and economic trends.
• Acquire the land in an area where you anticipate appreciation in market value.
• Hold onto the land while monitoring market conditions and development in the surrounding area.
• Sell the property once the surrounding area experiences growth and demand increases.

Value-Added Improvements

This strategy involves purchasing raw land and making improvements, such as obtaining subdivision or development approvals, to make it more attractive to investors or developers.

• Locate the right piece of land in an area where you can add value through approvals, subdivision, or other improvements.
• Purchase the land and understand the local zoning regulations, subdivision requirements, and other regulations.
• Obtain all necessary approvals, permits, rezoning, and environmental assessments.
• Develop the necessary infrastructure, such as installing utilities.
• Market the land to potential buyers, highlighting the improvements.
• Negotiate and close the sale once you've found a buyer who is willing to pay your asking price.

Developing and Flipping Land

This strategy involves purchasing land, developing a property, and then flipping it for a profit.

• Conduct extensive market research into the area where you plan to buy land, including local market trends, property values, and demand for properties.
• Acquire financing through a combination of personal funds, loans, and partnerships with investors or lenders.
• Find the right land for sale that suits your investment goals and negotiate the purchase at a price that allows for a reasonable profit margin.
• Conduct due diligence on the property to ensure there are no legal issues, liens, and that the land is suitable for your intended purpose.
• Create a comprehensive development plan, including architectural and engineering designs, permitting requirements, and a construction timeline.
• Obtain the necessary permits, such as zoning changes, building permits, and environmental assessments.
• Begin the construction process, hiring qualified contractors and managing the project closely to stay on schedule and within budget.
• Start marketing the property before development is complete to generate interest from buyers.
• Negotiate a favorable price with buyers to ensure a good profit on the deal.
• Complete the sale by finalizing the paperwork, transferring the title, and calculating your profit by subtracting all costs associated with land acquisition, development, and sale.

Benefits and Risks of Buying and Selling Land

Benefits

• High returns: Land flipping can provide investors with higher returns compared to other types of real estate investments.
• Less competition: There is less competition in land investing compared to strategies like flipping houses or rental properties.
• Quick turnaround: Land flipping can be quicker than projects involving building or renovating, allowing for faster profits.
• Lower upfront investment: Purchasing only the land requires less money upfront, making it more accessible to investors.
• Multiple strategies: Investors can choose from a range of strategies, including holding onto the land, a quick flip, or other options, allowing for adaptability to market conditions.
• Reduced holding costs: Vacant land typically incurs lower ongoing costs, such as property taxes and maintenance, compared to developed properties.

Risks

• Zoning and regulations: Local zoning laws and regulations can change, impacting the land's potential uses.
• Development costs and risks: Developing the land adds a new set of costs and risks, including overspending and delays.
• Timing: Selling too soon or too late can affect profitability, and it may be challenging to sell a property in a downturn.
• Finding buyers: It can take time to find buyers for land, impacting cash flow.
• Environmental issues: Unforeseen environmental challenges, such as contamination, can be costly and affect the land's marketability.
• Permitting delays: Obtaining permits for development or land use changes can be a lengthy and complicated process, impacting timelines and budgets.

Final Tips

Flipping land can be a lucrative venture, but it requires a combination of real estate expertise, financial planning, and effective project management. It is crucial to have a well-thought-out strategy and stay flexible to adapt to changing market conditions.

Land flipping

Advantages of Land Flipping:

• Incredible Returns: It is not uncommon for investors to make over 100% ROI in a single land deal.
• Easy to Find Deals: Finding deals in land flipping is relatively simple compared to other real estate investments.
• Cheaper to Fund: Land flipping deals are much cheaper to fund than traditional real estate transactions, with properties typically costing between $1,000 and $5,000.
• Low Competition: There is very little competition in land flipping compared to other real estate investments, as most investors focus on houses or commercial properties.
• Recession-Resistant: Land flipping is strongly protected against recession. Even in a recession, investors can still buy properties inexpensively and sell them at adjusted market rates.
• Cash Flow Generation: Land flipping can generate cash flow through seller financing, where investors make a profit from the sale and additional interest charged over time.
• Avoidance of Common Real Estate Issues: Land flipping allows investors to avoid the "Three T's of Real Estate": tenants, termites, and toilets.

Disadvantages of Land Flipping:

• Active Business: Land flipping is an active business that requires constant work to generate income. It is not a passive investment where you can sit back and collect returns.
• Challenging Sales: While finding deals is easy, selling properties can be more challenging and time-consuming. It requires a strong marketing strategy and the ability to negotiate favourable terms.

Steps to Getting Started with Land Flipping:

• Choose the Type of Land: Consider infill lots in urban areas, raw vacant land, or properties in mountainous, desert, or forest regions. Each type appeals to different buyer segments.
• Select the Location: Location is crucial. Properties near metropolitan areas are generally more marketable. Research the popularity of an area by analysing listings and recent sales on platforms like Redfin and Zillow.
• Determine the Use of the Land: Consider factors such as building restrictions, development costs, and local regulations. Common uses include personal recreation, camping sites, prepper sites, potential Airbnb properties, and long-term wealth preservation.
• Marketing for Land Deals: Use direct mail campaigns, cold calling, and digital marketing strategies to reach landowners interested in selling their properties.
• Selling the Property: Close the deal, create visual marketing content, advertise the property on various platforms, negotiate with buyers, and facilitate the closing process.

Building a Land Flipping Business:

To turn land flipping into a thriving business, establish efficient processes and systems. This includes researching new areas, implementing streamlined acquisition processes, creating targeted marketing strategies, and optimising operations through standard operating procedures, automation, and delegation.

Renting land for indoor storage

Renting out land for indoor storage is a great way to generate passive income. This is a lucrative market, and by carefully considering and selecting the appropriate type of storage facility, you can make a good profit.

There are several factors to consider when renting out your land for indoor storage: budget, shape, and land size. It is also important to understand the specific type of storage that will be required. For example, will it be for industrial, rental, or warehouse purposes?

One of the benefits of renting out land for indoor storage is that it can be used to store large items such as boats and vehicles. It is a more affordable option compared to traditional storage units, and there is no limit on space. In addition, renting out land for indoor storage can provide flexibility, with some renters charging per square foot or offering fixed rates for a specific amount of space.

When renting out land for indoor storage, it is also important to consider the security of the items being stored. While traditional storage facilities may have security measures in place, they are still susceptible to theft, especially those located on the outskirts of town. Renting out land closer to the city may be a better option in terms of security and convenience, but this may come at a higher price.

Another thing to consider is the accessibility of the storage space. Traditional storage areas may have limited hours for accessing stored items, which can be problematic for those who need access outside of these hours. Renting out land for indoor storage with 24/7 access may be a better option for some renters.

In addition, it is important to properly prepare any items that will be stored outdoors to protect them from the elements such as sun, rain, and snow. Using tarps and covers can help to protect the exterior of stored items.

Overall, renting out land for indoor storage can be a great way to generate income, but it is important to carefully consider the specific requirements and needs of potential renters to ensure a successful venture.

Renting land for agricultural use

Renting out your land for agricultural use can be a great way to generate income. Leasing your land to farmers or ranchers can provide them with valuable farming opportunities while also putting money in your pocket.

There are a few things you should keep in mind when considering renting out your land for agricultural use. Firstly, it is important to establish a clear and detailed rental agreement or contract between both parties. This will help protect your interests and ensure that both you and the farmer understand the terms of the lease. It is also a good idea to consult with a legal professional to ensure that all the necessary steps are taken and that your contract is ironclad.

Additionally, you should consider the type of agricultural production that is best suited for your land. This will depend on factors such as zoning restrictions, soil type, and the availability of water sources. For example, if you have irrigated cropland, you can expect higher cash rents compared to non-irrigated land.

It is also worth noting that the scale of your land may impact the interest from farmers. Larger plots of land, typically 20 acres or more, tend to be more attractive to farmers as they can consolidate their operations and reduce travel between different plots of land. However, this does not mean that smaller plots cannot be leased; they may simply be less appealing to larger farming operations.

When determining rental rates, consider factors such as the location of the land, the quality of the soil, and any improvements or investments made to the land. Additionally, you may want to explore the option of share-cropping, where the farmer receives a portion of the harvest in exchange for their labour and equipment.

By renting out your land for agricultural use, you can not only generate income but also support local farmers and boost the local economy. It is a mutually beneficial arrangement that can provide you with a steady source of revenue while also helping farmers overcome one of their biggest obstacles—access to land.

Frequently asked questions