Investing in land for future financial benefits has always been looked upon as an intelligent security venture. However, the past few years have shown the land and housing industry to be particularly unstable, placing doubt and concern into the minds of investors.
Fully informing yourself before taking the financial plunge will prepare you for the many ups and downs of land ownership. Total Mortgage put together an informative article on the top 3 things to consider before making a land purchase.
- Length of Turnaround
As with any real estate purchase, whether your investment is a wise one or not depends, in large part, on how long you plan to wait until selling. Land purchased in 1970, for instance, will have enjoyed a significant increase in value over the years, despite the many market fluctuations. However, if you purchased land in 2012, you may be looking at a loss if you try to sell today.
If you want to reap serious rewards from your investment, you’ll need to be prepared to do absolutely nothing for years. You may even have to leave the property alone for a decade or longer. During this time, you’ll be forced to spend money to maintain the land while receiving no income from it.
- Additional Expenses
Unless farming is in your immediate future, be prepared to put effort into landscaping. Whether you pay someone to cut the grass or you do it yourself, you’ll be required to concern yourself with land maintenance on a regular basis.
Property taxes will also take a substantial chunk of your family budget. While you may not notice this tax when it’s rolled into your monthly mortgage payment, when presented as a bill, you’ll be well aware of it. Additionally, when it comes time to sell your property, you’ll be required to devote a chunk of the proceeds to the IRS.
- Risks & Rewards
As a property owner, you should be aware of the laws pertaining to your property. In some cases, an easement on your property means others may be allowed to use it. This easement grants right-of-way to local utility companies, neighbors, or the general public, whether it’s a roadway that runs through the property or a power line that runs beneath it.
Depending on the location of your property, you may also be at risk for a lawsuit if someone should become injured or die while on it. You can help reduce those risks by installing “No Trespassing” signs on the property, but you should be aware of any injury risks on your property and take measures to repair them. This includes risks that could impact occupants of adjoining properties, such as falling objects. Vacant land insurance is a great way to protect yourself, and costs are low when compared to insurance on occupied property.
Purchasing land can be a financially advantageous investment. If your are currently weighing the pros and cons, be sure to take all points of concern into account before making your final decision. Consult with a land expert, mortgage advisor and insurance representative to gain a complete, well-informed financial picture.