Unlike properties that have been improved, such as residential housing or commercial buildings, vacant land usually does not provide quick income from tenants in the form of rent payments. It can, however, offer other benefits that real estate investors may find equally attractive. If you are currently trying to decide whether purchasing raw land is a good investment strategy for your situation, here are three potential benefits that you will want to consider.
Little requirement for oversight or expenses during ownership
Investing in developed land, whether residential, commercial, or industrial, can require immediate inputs of time and money to ensure that structures are sound and codes and guidelines for occupancy or usage are met. In addition, investors will need to spend time and money to attract and screen tenants or pay for property management services to do so.
When purchasing raw land, however, investors rarely need to do more than pay annual real estate taxes during their ownership or until they are ready to sell or begin developing the land. With no tenants to deal with, repairs to make, or building code issues to contend with, the purchase and ownership of raw land can be a stable, financially safe long-term investment strategy.
Fewer competing buyers when purchasing
Investors who have been observing the current residential real estate market have no doubt seen home prices surge as inventories of available homes have sharply declined. With fewer homes to choose from, prospective homebuyers, including investors, may have been forced into fierce competition for a chance to purchase suitable listings.
When buying raw land, however, the field of prospective buyers is greatly reduced. With less competition to contend with, investors can take sufficient time to compare properties and seek out those that can offer them the best real estate investment opportunities.
Greater flexibility to decide land utilization
Another important reason to consider investing in raw land is that investors have far greater flexibility to decide how the land will be utilized, both now and in the future. For example, investors in raw land usually have the opportunity to:
- remove and sell valuable assets provided by the land, such as marketable timber
- subdivide into smaller parcels to increase resale opportunities
- seek zoning changes that could potentially add value to the property
- make changes and improvements to increase value
Investors who would like to learn more about the potential benefits of buying raw land should consider working with a land company.