The Pros (and Cons) of Investing in Land
mattpayne Matt Payne last edited by
I know everyone around here seems to think vacant land is a great investment, and maybe it is, but I'd to see some real, unbiased opinions about the upsides and the downsides of investing in land.
Surely, there must be plenty of things about land that are NOT as advantageous as other types of real estate.
What are those things? What kind of an investor would be better off sticking to houses and improved properties rather than land?
jawollbrink Jason Wollbrink last edited by
An investor that wants to passively own land they buy at market value and hold in hopes it increases in value...this could work but imo the land banking days are gone.
Land is a great investor for someone actively aquiring it below market value and flipping or selling on terms.
The way most folks in this group (and this niche) invest in land is such that it produces zero cash flow until sold. Seth has done some interesting articles (search the blog) on how to produce income while holding land such as renting it out to coffee farmers - but typically no cash flow until sold. I.e. the income stream is all about buy low-sell high and/or sell on terms ad collect 7 to 12% interest on your money (which in most circles is a decent return). Sometimes it can be feel like a long and nerve racking 60 to 180 days between cash out and cash back in.
Matt Payne I invest in both rental properties and land. Here are the pros and cons that come to mind of land flipping as compared to rental properties.
Pros of land flipping
- Less capital required (depending on type/size/location of land)
- No tenants, toilets, etc to deal with
- Buying process is generally simpler than houses - no home inspections, fewer docs to sign, usually buying with cash so no mortgage to deal with
- Returns can be incredibly high and quick
Cons of land flipping
- Not tax advantaged; profits are taxed as ordinary income
- Income is not recurring and consistent (unless you are selling land on terms...and then you have to deal with non-payment when that happens)
- Active investing rather than "passive"...you have to spend the time and energy to keep buying and selling (or have partners/VAs to help with this)