Raw land is that which has no property or structures built on it. This undeveloped land has substantial investment potential, as it offers unlimited benefits when managed the right way. But seeing as vacant lots can come with their burden of issues, you need to figure out how you can make money on raw land.
Compared to other real estate investments, raw land is possibly the cheapest to acquire. A long-term strategy and a penchant for patience are necessary to make money out of this untouched terrain.
Can you develop raw land into a viable investment, and is this form of real estate synonymous with a persistent appreciation or passive income cash flow?
3 Ways to Make Money on Raw Land
Raw land isn’t a short-term investment unless you are planning on flipping it soon after its purchase. This is an inexpensive investment that even novice investors can try their hands at, and with the right strategy, can be profitable. Investing in raw land has the advantages of;
- Being heap to acquire
- Having little or no buyer competition
- Ownership and maintenance costs are low
- Have potential for return on investment
- Flexibility to develop on let sit
- Long-term passive income potential
You can make money on raw land by subdividing it to increase the value or by putting up developments that make its use profitable. Historically, raw land appreciates more often than developed property, and you can also put your land in the hands of leaseholders or tenants for passive income.
Subdividing Raw Land for Sale
One way that you can make money on raw land is by subdividing it into lots for sale. You can increase total market value by separating acreage into vacant plots that you then sell to small-scale buyers. Purchasers for smaller, more affordable parcels are many, and on account of marketability, you’ll be able to make returns on your raw land investment.
Developing Raw Land
Developing your new property is one of the more popular ways of maximizing your investment in raw land. That’s dependent on where your vacant plot is located, what the zoning restrictions are, and how the rental or lease prices are in that area. Notwithstanding, you can turn raw land into a commercial, residential, or multifamily property and put your acreage under multiple investment entities.
Buy and Hold Raw Land
Appreciation is one of the primary investment return sources, thanks to inflation. In the long term, your investment in raw land that’s bought and held will likely become valuable in the coming years. As a long-term investor, you can reap viable returns by letting your vacant plot sit while its market value appreciates.
What to Consider Before Investing In Raw Land
Before signing into a raw land deal, you’ll have strategized on the investment type as each area has its usage limiting zoning restrictions. Any investor can tell you of rewards and risks attached to all investments, not just the ones involving raw land. Factors to consider when investing in raw land include market conditions, the future of the local economy, and perceived demand for property.
To better evaluate your chances of making money on raw land, there are attributes to review, which include;
Location of the Raw Land
A vacant lot’s location may not be the only consideration during your raw land investment evaluation, but it’s the most essential. Choose from different market catchment areas and narrow down your options to plots that aren’t off the grid and those that will allow your preferred development. An expanding neighborhood, for instance, can become profitable if you bought land for a construction project.
Zoning Regulations on the Property
Local authorities zone land, including vacant lots for what they can or can’t be used for. Zoning will limit the investments you can undertake, such as on land that’s only usable for residential or agricultural applications. While rezoning is possible, the long protracted process puts a strain on any investment and the money you can make on raw land.
Rezoning procedures take approximately 180 days, delaying your investment strategy and increasing costs. To avoid getting stuck with land you can’t monetize, make yourself aware of the zoning regulations attached to a piece of raw land.
Availability of Utilities
Raw land is usually in the middle of nowhere or in completely underdeveloped rural areas. While such land has a lower buying cost, you should make sure there is access to water lines, electricity, or sewerage mains.
You don’t want to find yourself in a situation where your investments are at a standstill waiting for utility company hookups. Find out about the resources available on the raw land, such as water wells or septic dugouts that restore value to rural property.
The Raw Land’s History
A title search of the raw land you’re eyeing for investing in will uncover any ownership disputes. You should seek to find out how long the current seller has retained the property. Issues with the land, such as ecological or environmental hazards, will have owners trying to dispose of a vacant lot soon after buying it.
Hire a surveyor, or use a buyer’s agent to investigate any legal issues with the raw land. This will confirm the property’s boundaries and identify potential restrictions or natural hazards.
Undeveloped land can be had at low prices, with avenues including county tax sales and property auctions. The ability for your raw land investment to return positively is heightened by how cheap you can acquire it, but due diligence should be conducted when purchasing untouched rural acreage.