Land buying is no new thing. People have been investing in land for thousands of years. In fact, many people decide to invest in land. Land investing can be a good method for growing net worth — but only when focusing on the best property types for investing. Land ROI (return on investment) is on the rise.
“Land is a great investment,” said, Whitetail Properties Land Specialist Jeff Phillips. “It’s a great long-term investment if you make a good purchase price-point wise. If you can get property at a decent price, there isn’t any doubt that, as time [goes], it’ll be worth more money than you paid for it.”
Here are some of the most popular types of property to invest in.
Editor’s Note: This is not professional financial or investment advice.
1. Timber Tracts
Those who choose to invest might do so in timber tracts. This is an excellent buy-and-hold opportunity. Depending on tree maturity and density, as well as timber prices, consider harvesting timber immediately or waiting for a better time.
“Logging efforts can also open beautiful views on hillsides,” said Ben Richardson, Alabama Whitetail Properties Land Specialist. “In mountain and hill country, this can establish incredible opportunities for building sights that people love. Plus, with timber harvests, you can make some money. You can use that money to pay down on the mortgage, put toward another land purchase, make improvements to the property, save for a rainy day, and more.”
2. Tillable Acres
If people and livestock continue to eat, farmers will continue to till ground. If they aren’t tilling it, they’re raising crops of some sort in some manner. Therefore, for those who choose to invest in tillable acres, effectively buying and holding these acres while simultaneously receiving farm rents by leasing out the land to agricultural professionals, can see a great financial return.
“With tillable, there are certain areas that are really escalating in value,” said Tim Kent, New York Whitetail Properties Land Specialist. “It’s because the tillable is transitional land, and in time, it can become development property for residential housing. Or it’s straight tillable land that’s staying as tillable, and the value is increasing considerably.”
3. Recreational Ground
The market for recreational ground has never been hotter. Hunting, fishing, trail riding, and more — these are activities that require land access of some kind. Owning it is one of the best ways to invest. Of course, this is a buy-and-hold move. Furthermore, leasing it out (i.e.: hunting rights) is another short-term benefit.
“When looking for a recreational farm, I look for something that maybe has some mature timber where I could do a timber harvest,” Richardson said. “That does several things. You can create a diverse habitat, open roads and trails for free (the logging company will come in and open those roads for you). You can sort of dictate where those are located. This helps with clearing food plots.”
Kent also likes the idea of combining the recreational and timber investment ideas into the same transaction. “For recreational and wooded acreage, we’ve seen some good increases in those property values, especially over the past five years,” Kent said. “They’ve tripled in some areas, which is considerable. You can buy something and allow it to appreciate over time as land values move up. As the old saying goes, they aren’t making it anymore. If you buy woods with good maple and oak, you have the opportunity for that to continue to mature. As it grows, you have the chance to harvest it.”
Phillips reinforces the point and explains the importance of internal road systems. “Timber quality is a huge investment benefit,” Phillips said. “If it has internal roads that at least a side-by-side can travel, that offers a tremendous advantage. That’s a worthy investment. It’s much more likely to be purchased if it already has an internal road system.”
4. Country Homes
The pandemic sparked a mass exodus from city life. People left large cities in droves and moved to the country. Of course, with working from home a continuing trend, fewer professionals are commuting, and more people can afford to live in the country. Again, like other investments, buy-and-hold country homes can offer great returns, especially given monthly rent prices.
“To me, it’s purchasing properties that have great views and water features,” Phillips said. “That’s common sense, because those are two things people always want, especially if you can couple those. There isn’t a better investment than those with good views and water features — dependable water sources that aren’t seasonal.”
5. Property Division Potential
Another type of property investment includes tracts that can be divided into smaller acreages. Oftentimes, lower acreages bring more per acre than larger tracts. Therefore, purchasing subdividable properties with extensive road frontage, and dividing these into smaller properties (that are more affordable overall), can increase return once re-sold.
“I like good road frontage,” Richardson said. “It can be a timber tract, or a bigger tract with good road frontage and has division potential.”
Phillips agrees. “For subdivision to happen, you must have a certain amount of road frontage,” he said. “Purchasing properties that can be subdivided gives options to sell off [lots] without a lot of issues. Subdivided properties lend to development as well. But it’s a good investment if they can be subdivided.”
6. Development Potential
Many cities and towns are growing, and as these continue to spread, it will create new land investment opportunities. Urban sprawl isn’t going away anytime soon, and neither is this investment category.
“Maybe it’s closer to a metropolis,” Richardson said. “So, it’s not in the growth swing stage yet, but I know development is pushing that way, and properties can be developed into mini farms, mini hunting tracts, home sites, or subdivisions and bring profitable appreciation.”
7. Short-Term Rentals
Some people prefer renting over owning homes and property. This creates a demand for home rentals, some of which might even be on a short-term basis. This is especially true in areas where tourism is higher.
“With short-term rentals, such as various cabins and houses, there are opportunities,” Kent said. “In my area, there are a lot of lakes (Finger Lakes), and there are a lot of short-term rental opportunities there.”
Making Good Moves
Investing involves making the right moves. Of course, there are many different things a person might invest in. Throughout time, land has proven itself.
“Cash isn’t good,” Kent said. “It doesn’t grow at any appreciable rate. The bank is always going to have cash growing at a rate that’s less than the interest they’re collecting on loans. You might get a money market account that pays out 3, 4, or even 5%. But you might have land increasing in value at 8 to 10% annually. That’s a considerable difference in margin.”
Kent says that, if you buy right, you can buy, and have it move at a rate that’s better than what you’d get in the stock market. “Case in point, I bought a cabin at tax auction,” he said. “It needs a bit of work, but I bought it at less than 50% of market value. Again, I’ll have to invest back into it, but I’ll be able to sell this cabin in a year, maybe two at the most. I’ll keep my capital gains to a relative minimum, probably do a 1031 exchange, and I can maximize my return on this investment by comparison to the stock market.
“Additionally, for someone like me, I want something I can have and hold,” Kent continued. “Just like a deed says — to have and to hold. I know that, with this cabin, I own it. It is mine. To a certain extent, I can control what’s happening. As the market appreciates, I can see the benefit of that. I can even make improvements to this land. I can invest $10,000 into it and maybe get $20,000 back, if I’m wise about what I’m doing. You sort of have that control. For some people and personalities, it’s more comforting.”
Regardless, those considering investing in land have decisions to make. Is buying land for investment right for you? Only one person can answer that question, and that person is you.
“They aren’t making any more of it, and the demand is very high,” Phillips said. “It has been since I started. People are looking for land. If you make a decent price-point purchase, it’s a tremendous long-term investment.”
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