Whether you’re looking to make your first major purchase with hopes of building a home yourself, or you’re looking around for a second or third investment property, you might find yourself interested in purchasing raw land. But many people don’t understand what raw land is and the implications for investors that come with it.
While many people are divided on the subject, raw land can make a very solid addition to your investment portfolio, assuming you do a little bit of homework first. Let’s take a look at what raw land is and what you need to know before buying.
What Raw Land Really Is
No, it’s not a type of sushi! Raw land is actually land that has not had any improvements made on it. When considering improvements, we’re talking about houses, fences, lighting, sewage, or anything else designed to make the property livable. Raw land must also not have been cultivated for any livestock or crops. Raw land is pure land, and nothing else.
You may have been attracted by the lower price compared to land that has been developed, but you need to make sure you realize how much you would need to put into the land to develop it for your intended use. The possibilities for how you could use raw land are endless.
What Is It Good For? Absolutely Anything!
People may be attracted to raw land for a variety of reasons. Maybe you’re in search of the location for a super desolate, quiet cabin in the woods. You might also be looking for a plot of land to hunt on with your buddies. Maybe it was your childhood dream to start a carrot farm. Perhaps it’s to start a cow rescue. Or maybe you simply want to invest your money in something tangible.
The point is, you can use raw land for a vast variety of things. Some of the main things you need to look out for when purchasing raw land are zoning restrictions and road access. Planning ahead is super important, or you may end up at a “dead-end down the road.” Zoning laws outline how you can or cannot use the property, so you’ll want to make sure they align with your goals. Look into what the city or county has planned for the land surrounding it as well, plus where the current and future streets are.
What’s It Going to Cost Me?
Many people see the relatively lower price on raw land and get money signs in their eyes. But depending on how you want to use the land, you might have quite a few costs. If you’re planning on developing the land, you will want to get a solid estimate on how much all the necessary improvements will be before purchasing the land.
If you simply want to buy and hold, then there aren’t too many costs on top of the price of the land. This makes raw land investments a solid choice for those just starting out. Banks see financing these loans as higher risk, so you’re often expected to have a sizable downpayment.
Once you’ve narrowed down exactly what you plan to use your raw land for, you’ll also want to figure out the taxes for it. This will vary whether you’re improving the land, living on it, or making money of it. You should also sit with a professional to learn about the potential deductions you may receive for owning raw land as well.
Why You Should Invest in Raw Land in 2022
One of the main reasons investing in raw land is a solid plan is that it’s a relatively hands-off investment. Depending on your goals, the best way to make money is to buy the land and sit on it. Since land is a scarce commodity, meaning no more can be created, it’s a safe assumption that values will continue to rise.
The most important factor in raw land investments is choosing the right piece of land at the right price. Work with an experienced real estate agent who knows the market that you’re shopping in and don’t make emotional decisions. Do your research, and the land you own can start making you money while you sleep.
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