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Some of the best real estate investments are raw land purchases. The idea is to buy raw land in an up-and-coming neighborhood, sit on it, and then sell it to a developer who will do anything to get their hands on it. But while this sounds great, there are a few caveats that are specific to raw land you should know.

You May Need to Wait

There are plenty of ways to make serious money off of raw land, but you may need to wait a bit before the right offer comes along. You need to look at who's moving into the neighborhood, who's moving out and why the land is priced the way it is. This can give you a better indication of when you'll be able to sell it for the price you want. Some people can't afford to have their assets tied up for too long in raw land, but those who are patient can typically see a significant return on their investment.

Check the Topography

From soil erosion to sinkholes, it's not always obvious what makes land good to build on. Overenthusiastic tree roots can easily interfere with a foundation, so much so developers may avoid the project altogether. If the land is surrounded by hills, builders may hesitate to build because the structure will get too much shade.

Zoning Laws Matter

Buyers are highly encouraged to research the current zoning laws that will affect their land. Doing so will give you a sense of how difficult it is to build and why. It should also give you an indication of what's to come down the line. For example, if your land is located in an area that environmental groups want to protect, the zoning laws may change between when you purchase the land and when you sell.

Property Taxes

Even if you're not doing anything with the land, you'll still need to factor in the property taxes. Again, if you're waiting for a while to sell, this can eat into profits fairly quickly. Many landowners can sell quickly at a healthy turnaround, but it's important to plan ahead if it takes more time than you imagined.

Watching the Land

Unless you're hiring security guards to watch your land, it can quickly become a dumping ground. A certified inspector can give you more information as to the state of the land, so you know of any contamination long before you sell.

There are so many ways to make money off of raw land, but it helps to understand more about how certain factors can interfere with your sale price. As long as you're planning ahead, you shouldn't have any surprises.

Tag: Land Investment