Maybe you've been thinking about buying raw land, but you're not really sure why it's a good investment. Most people don't know this (which is why you're about to be ahead of the game), but raw land is one of the best investments you can make. Here's why:
1. Land Only Appreciates in Value
Raw land is categorically and objectively an appreciating asset for two simple reasons: limited supply and increasing demand. There is a finite amount of available land that has yet to be built upon, making it a very attractive commodity in a world where the population is increasing exponentially. Therefore, in accordance with the most basic economic principle (supply and demand), raw land will inherently increase in value as demand grows for the limited asset. It is no longer a question of whether or not land appreciates, but rather how much it will appreciate.
2. They Aren't Making Any More of It
The land that exists today is all the land that exists. We can't make any more of it. Land is an extremely valuable resource with limited quantities available. You will find yourself with a finite asset that other people want to get their hands on. Stocks, bonds, mutual funds, and 401Ks all make sense in certain scenarios, and so does land.
3. It's a Hands-Off Investment
With other types of real estate investments you'll be dealing with tenants, toilets, bugs, mold, lawn care, leaking roofs, bursting pipes, broken furnaces, and the hundreds of other issues that come with owning homes. Vacant land doesn't involve ANY of those things. Once you buy it… it sits there, it behaves itself, and nothing happens.
4. More Affordable Than Developed Land or Homes
It’s usually cheaper to own as a long-term investment, especially since property taxes and fees are often lower than they are on developed land. Here's a great example of Dave Van Horn from Bigger Pockets who invested in raw land:
"When I purchased the vacant land for my vacation home, the land value went up during the time between when I purchased it and when I developed it. I was able to use it as collateral for the construction loan, which I was eventually able to convert to a conventional mortgage without refinancing. When the project was completed, my total cost for the land and development was much lower than the retail value of the property."
5. It's Low Risk
Land has fewer restrictions and codes than houses or buildings. No one can steal it, and there is very little competition in buying it.
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