A Millennial's Guide to Investing in Raw, Undeveloped Land

As millennials transition into significant investment decisions, many are considering an asset class that's often overlooked – raw, undeveloped land. Investing in land offers a unique combination of benefits and challenges that differ from traditional real estate investment. If you're a millennial contemplating your first venture into land investment, this guide will equip you with essential knowledge to navigate this intriguing sector...

The Lure of Land Investment:
Investing in raw land has several advantages that make it an attractive proposition:

1. Potential High Returns: Purchasing raw land at a relatively low cost and holding it until it appreciates or developing it for resale can yield high returns.
2. Low Maintenance: Unlike rental properties, undeveloped land doesn't require maintenance, renovations, or dealings with tenants.
3. Long-Term Investment: Land can serve as a long-term investment that isn't subject to the short-term volatility of many other investment classes.
4. Flexibility: Raw land offers a blank canvas for future development, agricultural use, or even a personal dream home.
5. Inflation Hedge: Like other real estate, land can act as a hedge against inflation, with its value often rising over time.
   
   

Risk Considerations in Land Investment:
Despite the potential benefits, it's crucial to understand the inherent risks associated with land investment:

1. Liquidity: Land tends to be a less liquid asset. It can take time to find a buyer when you're ready to sell. However, if you use the right tools and a local realtor you should be able to sell it rather quick.
2. No Cash Flow: Unless you lease your land, it won't provide regular income as rental properties do.
3. Development Costs: If you decide to develop the land, you may incur significant costs for construction, utilities, and zoning compliance.
4. Market Factors: Local market conditions, zoning laws, and environmental factors can impact land value.
   
   

A Step-By-Step Guide to Investing in Land:
Now, let's break down the essential steps that millennial investors should take when investing in land:

1. Educate Yourself: Start by learning about land investment, property laws, zoning regulations, and local real estate market conditions.
2. Identify Your Goals: Are you investing for long-term appreciation, future development, or leasing for agricultural use? Your investment strategy should align with your financial objectives and risk tolerance.
3. Evaluate Your Financial Standing: A solid financial foundation is crucial before investing. This includes emergency savings, a stable income, and a healthy credit score. For land loans, lenders typically look for a credit score of 640 or higher, but this can vary based on the lender and the specifics of the loan. Consider buying through a land investment company, often times there is no credit checks involved.
4. Set a Budget: Determine what you can afford, factoring in the land cost, potential property taxes, insurance, and future development or maintenance costs.
5. Choose the Right Parcel: Investigate local market conditions, future area development, and environmental factors. Seek professional advice from a real estate agent or a land planner with local expertise.
6. Assembling a Team: Consider working with professionals, including real estate agents, attorneys, surveyors, and environmental consultants. They can provide essential advice and help avoid potential pitfalls.
   
   

Leveraging Cash and Financing Land Investment:
Lacking substantial cash shouldn't deter you from investing in land. Several strategies can help you leverage cash and other financing options:

1. Seller Financing: Some landowners might offer financing, allowing you to make a down payment directly to them and continue making payments over time.
2. Land Loans: Some lenders provide loans specifically for land purchases. These loans might require a higher down payment and have higher interest rates than traditional home mortgages.
3. Partnerships: Pooling resources with friends, family, or fellow investors can be an excellent way to finance land purchases.
   
   

Conclusion:
Investing in raw land can be a rewarding venture, offering potential high returns, flexibility, and a hedge against inflation. However, it's crucial to understand the unique benefits and risks associated with land investment. As a millennial investor, taking a strategic approach, conducting thorough research, and leveraging professional advice can steer you towards a successful land investment journey.