How to Make Money by Developing Vacant Land

One of the best things about developing vacant land is making money! You’ve invested a lot of time and energy into developing your property and if you did a good job then getting a solid return on your investment is well-deserved at this point.

In this article, we’ll go through some great ways for you to make money from your vacant land investment.

Long-Term Rental

The first option we’ll discuss here is the most common and takes the least amount of hands-on involvement. We’ll use a single-family home for this example, but you can rent out any structure, from an airplane hangar to a restaurant.

The concept is simple. Advertise the property for rent and find a tenant. You’ll sign a lease with the tenant where you are the landlord and they make periodic rent payments to you while they live in the property.

Long-term rental periods are typically for one year, but you might choose to rent your property out for 6 months or 20 years. It depends on the type of lease, your plans for the property, and the tenant’s desired length of stay.

Pros:

Passive investment
Predictable revenue
Tenant quality is controllable

Cons:

Less flexibility on lease periods
Less potential revenue

Short-Term Rental

In today’s market, the shared economy has become a large component. It’s growing at a steady rate as people become more comfortable renting out their homes through sites like Airbnb and VRBO.com. In concept, it’s similar to a long-term rental, but it usually requires a more hands-on approach. For the additional workload, you can usually expect to make more money.

When you rent your property out on a short-term basis, you can typically charge a higher rate if you look at nightly average. The catch is that there is less predictability. Your place may be booked solid for 10 weeks in a row, but then it will be vacant for two weeks. It depends on supply and demand.

Before you take the short-term rental route, make sure to analyze the short-term rental market in your area. You can gather a lot of this data right from sites like Airbnb.com and VRBO.com. Or, you can go into more detail by using a site like AirDNA.com.

Pros:

Higher potential revenue
Flexibility on lease periods
Tenant quality may be hard to control

Cons:

Less-Passive investment
Unpredictable revenue

Selling the Finished Product

Both of the rental options listed above are strategies for holding the property. However, you may not want to deal with managing a home for multiple years. You may want to take all of the money out of the investment at once and move onto the next one. In that case, you’ll want to sell the property.

By selling the property, you get one large sum of money all at once. Rather than having smaller amounts of money come in over the term of a rental period, you can cash out and take your gains at the time of sale. You can then take that money and reinvest it into another development and keep rolling to more and more deals.

Pros:

Receive a large sum of money all at once
No property management

Cons:

No passive income
Tax liability on gain

These are three of the most common ways to make money by developing vacant land. It’s up to you to decide which option works best for your particular situation. Both from a financial standpoint and a lifestyle standpoint.