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    Is Land the Right Investment for Me?

    “Is land a good investment?” … This is the question we get just as much as, or even more than, “should I rent or purchase?” This is the question we are seeing much more often as less and less land hits our MLS system. So, what’s happening to the land values and why does it seem to be impossible to stumble upon? These are great questions and we will dive into that by the end of this segment. Purchasing land is a very nuanced business and should not be taken lightly. So to start off, let’s back up. When purchasing land, there are 3 main categories — these are typically homestead, development and farming. Figuring out which category your investment falls under may help you formulate a plan for purchase.

    For homestead, or residence, land can be a beautiful asset. There are so many different geographical features of topography, water availability, scenic views, etc that a purchaser will want to consider when looking to build their dream home. This option gives owners the ability to get creative with building whatever their heart desires at whichever orientation to the sun they can imagine. Now, for a few caveats to the sentiment …Will the property perc? (This is test done to determine the water absorption rate of the soil in preparation for building a septic drain field or infiltration basin). Will the development costs for a road/driveway, power to the property and water availability be too expensive for our budget? Are there building sites that are suitable for the floorplan we desire? These are all questions you will need to explore as you decide on your dream slice of earth.

    As for development, this investment pertains mostly to those who have the ability to develop land for subdivisions, commercial space or mixed use developments. For these investors, one of the biggest questions to get answered would be, “What is the zoning for this property?” As you know, certain zoning requirements/restrictions can limit what can be developed on the property in question. Determining the ‘highest and best use’ of a property is a great place to start. This can help determine your ROI (return on investment) while getting started on your pro forma.

    Lastly, farming is one of the oldest methods of investing in land. More recently, with factory farming and large scale agriculture as the main source of food production, small-scale food has seen a decline in production. There are many benefits to small-scale agriculture especially pertaining to the local economy. The farmer will not only get a majority of their farming needs from local sources, but they will be a tax source for the local economy as well. Food aside, many land owners have taken to lumber production as a source of income through land acquisitions. The most heavily farmed lumber would most likely be pine (loblolly, longleaf, etc). The lumber market can vary tremendously based on weather, supply/demand, location, and even vicinity to the closets mill! This option is great for someone looking to purchase a great deal of land as this option is less profitable on a small scale.

    I know this was a quick and brief overview of a few different types of land purchases, but hey, we’ve got real estate to go sell!! If you have any additional questions about what it means to invest in land (of which they are not making any more), feel free to reach out to us about any questions that you may have!! Thanks a ton and see you next time!

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    Our agents write often to give you the latest insights on owning a home or property in the Auburn and East Alabama area.

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