It's often been recommended that people should buy land due to its finite nature. When it comes to investing in land, determining the type of land to invest is a crucial decision for potential investors. Various factors, such as location, potential for appreciation, intended use, and market trends, play significant roles in influencing the choice. For some, agricultural land may promise steady returns through productive farming operations, while others might find residential or commercial plots more lucrative due to urban development and housing demands. Each type of land comes with its own set of benefits and challenges, making it essential to carefully consider one's investment goals and market conditions before committing to a purchase.
Types of Land to Invest In
Investing in land is one of the best ways to make money in 2024. Land is considered a low-risk and profitable investment choice compared to other forms of investment. There are many different types of land to invest in, and the type of land that investors choose depends on many factors such as economic growth, market demand, and personal finance goals.
The types of land that investors choose to purchase can include:
Farmland: Investing in farmland presents a rare opportunity to generate income from entirely undeveloped land through leasing to farmers. Farmers frequently seek pastureland for their grazing livestock, yet it is often economically impractical for them to buy and maintain all the required land on their own.
Commercial Land: Another excellent land investment strategy is converting raw land into a warehouse, storage facility, factory, mechanic shop, or shopping complex. Investors can also develop raw land into various ventures to generate multiple income streams. When considering land for commercial use, factors such as accessibility, location, and available amenities are crucial for investors to evaluate.
Recreational Land: Recreational land can be leased easily (for hunting, fishing, camping, and more), providing land owners with the opportunity to earn passive income from their land while enjoying it for personal use.
Residential Land: Investing in residential land is a prudent strategy with numerous benefits. Due to significant population growth, the demand for housing continues to rise, not only in urban areas but also in rural regions. Acquiring land in a prime location offers the potential for constructing homes or residential complexes, which can substantially increase in value over time.
Timberland: There are plenty of ways that investors can gain returns by investing in timberland. The most obvious is to harvest the timber for sale. Practicing proper harvesting and reforestation techniques can ensure that your timberland investment stays profitable indefinitely.
Undeveloped Land: Owning a piece of undeveloped land offers investors an almost endless list of possibilities for its use to generate income or to sell for a higher price in the future.
Is it Worth Buying Land as an Investment?
Purchasing land is a good investment that can provide incredible returns as long as you consider all of the risks and potential pitfalls involved. This is because land is a finite tangible asset that can't be created or destroyed, meaning that it constantly increases in value.
Before investing in land, investors should determine the type of land that they'd like to invest in, research land of interest, and conduct thorough due diligence to uncover any potential risks associated with the land that could cause them to lose money on their investment.
What is the Best Type of Land to Invest In?
Farmland is generally considered the best type of land to invest in. The main reason that investors are turning to farmland as the best investment opportunity is because of its long history of producing solid returns. Farmland values have steadily increased through history, and farmland owners have the opportunity to generate consistent revenue through agricultural production or leasing the land to farmers.
An appealing aspect of farmland is that it offers investors two distinct income streams: price appreciation upon the sale of the asset and regular rental and crop payments.
In addition to the above-average returns, investing in farmland has several other advantages:
Low Correlation: Farmland is uncorrelated with other major asset classes (such as stocks and bonds). In fact, farmland returns do not typically move in the same direction as the stock market.
Diversification: Diversification is crucial for reducing investment portfolio volatility and long-term increases in wealth. Many investors are turning to alternative investments, such as farmland, to diversify their portfolios and drive reliable returns.
Low Volatility: Farmland returns have historically had less volatility than most other asset classes. For long-term investors, low volatility is especially important.
Inflationary Hedge: Farmland is a valuable asset that generates essential commodities like grain and corn. Consequently, it benefits from inflation, which increases both land values and crop income. This has led some to consider farmland as a gold-like investment with added yield.
Some of the country's wealthiest individuals are acquiring agricultural land due to its stable returns and security. In fact, some of the largest landowners in the U.S. include well-known billionaires such as Bill Gates and Stan Kroenke, who have invested in farmland specifically as a way to enhance and diversify their portfolios.
How to Invest in Land
Investing in land can be an excellent addition to your investment portfolio due to its potential for high returns and tangible nature. However, it requires careful planning and consideration. Below are some essential steps for successfully investing in land:
Determine Your Investment Goals: Define what you aim to achieve with your land investment, whether it’s long-term appreciation, immediate cash flow through leasing, or a combination of both. Similarly, investors must determine the specific type of land that they'd like to invest in during this step.
Choose the Right Location: Location is crucial in land investment. Research areas with strong growth potential, high demand for the land type you are considering, and favorable economic conditions.
Evaluate the Land: Perform a thorough analysis of the land's characteristics, including soil quality, topography, climate, and access to water sources. For commercial and residential land, consider infrastructure, zoning regulations, and proximity to key amenities.
LandApp can help with property due diligence by providing nationwide property data including contamination risks, environmental risks, zoning, water stress levels, slope, soil types, and more. LandGate’s all-in-one property investment and intelligence tool can help you save money and save time researching properties.
Conduct Due Diligence: Investigate any legal and environmental concerns associated with the land. This includes checking for liens, easements, zoning restrictions, and potential environmental hazards that could affect the land’s usability and value.
Understand Market Trends: Stay informed about current and projected market trends that could impact the value and profitability of your land investment. This includes population growth, economic climate, and shifts in agricultural practices or commercial developments.
Assess Financing Options: Determine how you will finance your land purchase. Options include paying cash, securing a land loan, or exploring seller financing. Each has its pros and cons depending on your financial situation and investment strategy.
Consider Professional Advice: Consult with real estate agents, financial advisors, and land management experts to gain valuable insights and ensure you make informed decisions.
Investing in land can be a rewarding endeavor that offers both stability and growth opportunities. By understanding the different types of land investments, evaluating potential sites carefully, and taking a strategic approach, you can enhance your investment portfolio and achieve your financial goals. Whether for agricultural purposes, commercial development, or recreational use, land ownership remains a timeless and prudent investment choice.
Prospective property investors can explore land for sale on LandGate's marketplace for free, filtering by location, price, property type, and more:
