5 Ways to Profit From Land

Investing in land is often overlooked as a way to build holdings in your real estate portfolio, especially by beginning investors who could easily purchase a smaller parcel of undeveloped land at an affordable entry cost. There are many ways investors can profit from land. When you consider all of the possibilities, this real estate sector offers diversity to strengthen your portfolio and earn the highest possible returns on your investment dollar. Investors must be aware of many essential aspects of land purchases and their plans for the land. For example, does the parcel have accessibility by road, utility service connectivity, and no conflicts exist with zoning or local, state or federal laws?

Highly experienced investors with experience real estate market can help you determine the best location for your intended purpose and assess the value of the land. No matter your investment, it’s always suggested that you seek the guidance of someone experienced in that market sector. Unlike residential real estate, where you can easily compare properties, adding and subtracting set values for differences, pricing the land takes unique know-how to help determine value. So read on as we explore five ways you can profit from land.

Leasing

One of the ways you can profit from land is by leasing the land for others to use, for example, locations on busier roadways that serve seasonal vendors well, such as those who sell pumpkins, fireworks and the like. Additionally, farmers and ranchers lease land and are responsible for any development and taxes. Because the competition for land isn’t fierce, you can often make lower offers and gain more profit from your investment.

Development

Another way you can profit from land is by developing the land into commercial or residential property. Naturally, you’ll need to ensure that the numbers add up to a great return on the investment before delving into the project. Using the land residual technique to determine the value will help you make a sound investment. Often, investors combine land purchases with growth in their business interests and create even higher returns on their investments.

Improve and Flip

Of course, you should concentrate on up-and-coming areas to increase your ROI or return on the investment. For example, subdividing land into smaller lots is a great way to profit from land and by going the extra mile to add entitlements, you add even more value. In addition, garnering a low price on the land purchase will help improve returns.

Hold

They aren’t making any more land; given laws of supply and demand and historical data, the land will continue to appreciate. So simply sitting back and waiting for the land to increase in value, or holding the property, is another way you can profit from land. But, again, this is an effortless way to make passive income that requires little oversight other than paying taxes.