Investing in land offers many benefits, especially when compared to other property investment options like rental properties. For starters, there are generally very few costs associated with land investments. This is in stark contrast to real estate or other rental properties, which can have a host of fees and expenses that can significantly reduce profits — including real estate agent commissions, appraisals, surveying, property insurance premiums, transaction taxes, and more.

Additionally, unlike stocks and mutual funds, which are liquid assets that can be easily converted to cash on a moment’s notice, investing in land is an illiquid asset. If you want to sell your land, it will take a long time for the sale to finalize — and even longer if you’re looking to build up your holdings with additional small purchases. As a result, it’s critical to understand the intricacies of land investing before taking the leap.

Raw Land Investments

The most popular way to invest in land is by purchasing raw (undeveloped) land and either letting it sit empty or developing it into commercial, industrial, residential or agricultural property. Investors can also lease raw land for short or long-term periods to collect rent.

When purchasing raw land, it is important to keep in mind that location is king. If you purchase land in an area with zoning restrictions that prohibit new construction or that is located on a flood plain, you could lose a significant portion of your investment. It’s also vital to research the expansion of neighborhoods in your market area before making a purchase. Lastly, you’ll want to ensure that your property has water access. This is important because some municipalities don’t allow new hookups to city water because of ongoing drought conditions.

Another way to make money off of your land is by subdividing it for property sales. This can be a great way to increase your property’s value because it makes it more appealing to buyers. As with any investment, it’s important to do your homework before buying land, including researching local zoning laws and speaking with the city.

The benefits of land investing are numerous, but it’s essential to consider your financial goals before making a decision. Ensure that the profits you’ll earn by putting your land to work will match up with the monetary returns you desire in your portfolio. Then, once you’ve done your due diligence, it’s time to get started.