Are you wondering if you should invest in land? Adding land to your investment portfolio can reduce your risk and increase your returns. Check out these 5 reasons why land is a good investment!
Land is the oft-overlooked subclass of real estate that doesn’t get much attention. In today’s day and age, where home flipping is so popular that it’s become the subject of countless TV shows, it’s hard to get excited about plain old raw land. We think this is a mistake. Land has a place in all investment portfolios. Here’s why:
1. Land is an Excellent Passive Investment
After purchasing raw land, no action is required on your part. You can simply use raw land as an investment vehicle to park excess cash for the foreseeable future. With land, you don’t need to perform maintenance on it, install security measures for it or worry about it getting stolen. It can be entirely hands-off if you want it to be!
2. Land is an Uncorrelated Asset Class
The holy grail chased by all investment portfolio managers is the aim of increasing investment returns without increasing risk. Land is one of the few asset classes that, when considered as part of your investment portfolio, can deliver on this. This is because land value does not move in lockstep with changes in the stock or bond markets. In fact, raw land value is usually unaffected by the wild swings in those markets (it’s uncorrelated). This provides a peace of mind to investors knowing that even if stocks are in the tank, the value of your land is insulated because it is more affected by regional factors (growing towns nearby, zoning requirements, installation of utilities by the county, etc.). Since land is uncorrelated to the rest of the portfolio, the portfolio as a whole is more likely to be able to achieve higher returns with lower risk.
3. No More Land is Being Made
As we all know, land is one of the few assets where they aren’t making any more of it. Over time, desirable raw land will be purchased and developed for residences, cabins and cottages. With human population set to hit 8 billion as early as 2024, raw land will continue to be snapped up and developed as towns and cities expand. There’s no time like the present to get in on this growth.
4. You Don’t Need Heaps of Cash to Purchase Land
With homes, you need to involve banks who have the power to deny your mortgage request. With stocks, you need a decent chunk of change at your disposal to make a significant investment that justifies the commission costs. Land meanwhile, is very affordable even with utilities, and can usually be seller financed. At Compass Land, our seller financing process does not involve any credit checks or proof of income, and the monthly payments can be as low as a phone bill. Build your land wealth month by month, without sacrificing all of your savings up front.
5. Endless Possibilities for Income or Profit
Depending on the zoning, there is a plenty of flexibility in how raw land can eventually be developed. This raises the value in the eyes of your buyers and makes it quicker to sell. If the land is in a growing area, or has desirable uncommon qualities (waterfront, view) you can realize impressive profit if you hold the land for a few years. If you’re interested in putting the land to use while you own it, you could build a home on the land and rent it to produce consistent cash flow every month. Or you could start a business with it, and that’s where your imagination becomes your only limit. Golf courses, gun ranges, dirt biking parks, paintball facilities, campgrounds, hobby farms all have one thing in common – they require land to build on! Dream big with your land, or be the shrewd investor for future profit – both are great options!
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