Why Buy And Develop Vacant Land

Vacant Land Investing is Less Competitive

Investing in vacant land is a lot less competitive than traditional real estate. The idea of flipping homes has become so popular (thanks reality TV!) that the competition has gotten fierce. I remember one day, the grocery store clerk told me she was flipping a house, and later that day an Uber driver mentioned he was flipping a house too… When everyone is flipping houses, it’s no wonder 20 people are often fighting over the same property. It’s slim pickings!

That said, vacant land is a totally different story. It requires some creativity, strategy and mental effort, so it’s less competitive. That’s also why it’s a more rewarding investment space with lots of up-side potential and nearly endless possibilities. As Henry Ford once said, “Thinking is the hardest work there is, which is probably why so few engage in it.” If you’re willing to do what most others aren’t willing to do, you often get to enjoy benefits that most others don’t get to enjoy.

This is why there’s less competition in vacant land and there always will be. Human nature has barely changed in centuries and the path of least resistance is where most people spend their lives. That’s just alright for the masses, but if you’re looking for a great way to invest that isn’t overcrowded, the spoils of investing in vacant land might just have your name on them… IF you are prepared to expend some mental effort.

You Get Creative Freedom to Develop Whatever You Want

Thinkers are typically visionaries. A visionary is someone that can look at a blank slate and totally re-imagine what could be there. They face the same challenges as anyone else, but they don’t stop in fear. They think about how to create solutions to the issues they face. They’re problem-solvers.

In the world of vacant land investing, being a visionary is a necessity. You have to be able to look at a blank slate and imagine what could be there. The beauty of this is that you get full creative freedom to do whatever you like with the land as long as you do so within zoning ordinances. Operating within those guidelines, you can create anything your mind can imagine, and of course, that you can afford.

Keep Property Development Up to Your Standards

On top of creating your own vision for the property, you get control over the quality of the property. It’s completely up to you to decide how the project will come together. You choose the building materials. You choose the contractors who work on the property. Heck, you can even build it yourself if you’re handy with a hammer.

When you buy a property with a pre-existing structure on it, you don’t really know what you’re getting. Sure, you can get an inspection, but for a few hundred dollars, do you really have a clear picture of the quality of the structure? Probably not. Building from scratch gives you this peace of mind in knowing that you created a structure that meets your expectations and standards.

Seller Financing is Common

Buying vacant land opens the door to one of the most favorable finance options out there. Often times the seller of the land is willing to finance the land with a low-down payment and low monthly payments. This is known is Seller Financing or Owner Financing (two ways of saying the same thing). The nice thing about seller financing is the arrangements are typically more flexible than they would be at a bank. It’s just you and the seller of the property coming together and agreeing on financing terms. You can usually work out a great win-win that works for both parties.

Forced Appreciation

You don’t have to wait for the value of a property to increase. You can increase the value on your own, and there are a lot of different ways to do this. Any sort of development on the property will add value. You can do something as little as cutting a driveway into the property, or a more substantial project like building a finished home that’s ready to move into. The point is, you can “force” an increase in value by developing the property to whatever extent you choose. Developing the property also expands your buyer pool. Every step you take in developing the vacant land makes it easier for someone to buy the property. Most people don’t want to hassle with developing the property – they just want to enjoy it!

A Few Exit Strategies with Vacant Land

As the name implies, an exit is the way a real estate investor will be departing from the property. The most common exit in real estate is a sale. When you’re looking at any investment it’s a good idea to have an exit strategy in mind before you make your investment in the first place. Your initial exit strategy may not be the one you end up using, but it’s good practice to have a plan in mind ahead of time.

Entitle & Resell

Getting raw land entitled means getting approval to develop the property for specific uses. This option is for raw land which has no entitlement work done yet. The entitlement process requires the landowner to provide engineering and development drawings along with other documentation to the controlling municipalities for approval. Once entitled, the land is more attractive to developers. Land entitlement is not for the faint of heart. It requires experience and a lot of research. However, the payoff is quite high for these transactions.

Subdivide Into Smaller Properties

Another option is to subdivide a large property into smaller properties and resell each one to individual owners. This process can be straightforward in some areas and it can be quite difficult in other areas. Typically, the further you are from a major metropolitan market, the easier the process is. Subdividing large tracts of land is not as difficult as getting raw land entitled, but it does require research and you should have an idea of who you’ll be selling the land to once it’s been subdivided.

Draw Plans & Resell

Alternatively, you can have plans drawn to put a structure on the property and then resell the property with the plans. This usually requires you to work with an architect and possibly an engineer depending on the complexity of the structure and layout of the land. But the work involved could be well worth it. You’re creating a vision for the property so others don’t have to think about what could be. You’re showing them exactly what could be which is a great value-add.

Living On the Property While You Develop It

One of our favorite benefits of developing vacant land is that most jurisdictions and zoning laws allow you to live on the property while you’re developing it. You’ll typically need to have already pulled development permits and there’s usually a time limit, but it can be for one or two years. However, in most cases it can be renewed if you’re making progress with the development. This is not only a great way to save money, but it allows you to be more hands-on with your development which is a good thing!

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