Many a fortune has been made in real estate, and there is something deeply satisfying about owning property and collecting rent from your tenants. If you are itching to get started in the lucrative field of real estate, you might want to start with raw land instead of those costly developed properties.
Many factors make raw land the perfect entry point into the world of real estate and a great building block for your future real estate empire. Here are five reasons why buying raw land is the perfect first step into the wild world of real estate.
- You'll Get to Know the Local Market
It has often been said but definitely bears repeating - at the end of the day, all real estate is local, and every would-be investor needs to know their local market. Buying raw land is a great way to get to know the local real estate market, and with a much lower level of risk.
Whether you are buying rural land in the middle of nowhere or a corner lot in the middle of the city, you will get to know the nature of the area, and all the information you gather could prove valuable in the future. Even if your ultimate goal is to purchase single-family houses or apartment buildings, starting with a raw land investment could be a solid first step.
- The Upfront Costs Are Far Lower
Investing in real estate can be a great way to make money and earn a solid income, but getting started is often quite costly. If you plan to start your real estate empire with homes, apartment buildings, or commercial properties, you likely will need a cash infusion. Yet, getting a loan is not easy when you lack experience in the field of real estate.
Compared to those other forms of real estate, vacant land can be a huge bargain. You may be able to buy an acre of rural land or an undeveloped lot from your own savings, giving you a chance to learn about real estate without putting up collateral or paying interest to a lender.
- You Can Earn Income in the Meantime
Many would-be real estate investors believe that raw land is not a good earning opportunity, but that is not necessarily the case. While the vacant lot you buy may not earn you an income right away, a potential earning opportunity is just waiting to be tapped.
That vacant lot in the middle of the city could earn you a serious income when you paint some lines and turn it into a parking lot. If you own a plot of rural acreage, you could earn rent from local farmers anxious to plant their crops or graze their cattle and reap a profitable harvest. There are plenty of ways to earn money with vacant land, all while you wait for that undeveloped property to go up in value.
- Carrying Costs Are Generally Quite Low
Owning an apartment building or single-family home might earn income when you have tenants, but you are left with the carrying costs even when the units are sitting vacant. Property taxes, upkeep, and other costs can add up, making real estate ownership more costly than you realized.
It generally costs much less to own vacant land, making raw land investment an even better bargain and an even smarter way to get started. Taxes are generally quite low on undeveloped land, and other than the occasional mowing, that land should not cost you much more.
- Appreciation Potential Is Often Very High
Last but not least, the appreciation potential for vacant land can be extremely high, certainly higher than many homes and commercial buildings. If a developer comes along and wants to build on your land, you could see your initial investment double or even triple, and that is just one example.
When you invest in vacant land, you are by definition purchasing a product that gets scarcer and scarcer with each new development. Builders can always erect new houses, but no one can make additional land.
If you are anxious to get started as a real estate investor, you might think that buying a home or apartment building is the best way to go about it. After all, those are the types of properties most people think of when it comes to real estate. But there is much more to the process. Starting your real estate empire with vacant lots and undeveloped rural land has its advantages, beginning with the five benefits listed above.