Whenever you’ve told anyone about investing in vacant land or raw land, they may have struggled to understand the practical benefits and application opportunities at hand. Many people see upgrading the market value of untouched land as a complex, resource-intensive process that’s better left to the experts.
Vacant land is in its natural state, without structures, unimproved, and with no utility connections. But did you know that with due diligence and the correct strategies, you can invest in this vastly underutilized sector?
Beginners should no longer avoid the undeveloped landed property arena and, as such, have put together 10 tips for developing vacant land.
Why Buy Vacant Land for Development?
Nothing beats owning untouched acreage where you can walk around and feel the tangibility of this valuable commodity with all your senses. There are feelings of pride, hope, creative independence, and financial security, but also there’s price. Raw land is the cheapest form of real estate out there, and though traditional financing is tricky, below-market rates are always available.
Raw land also appreciates, and unlike other asset portfolios, has viable earning potential. It all boils down to when you buy vacant land, its location, and the strategy you’ve got for developing it. In a short time, developing your raw land can increase its original value from three to five times.
What are the 10 Things To Do When Developing Vacant Land?
The type of development you’ll carry out on your land will hinge on local zoning or planning administration restrictions. Once you’ve seen that, explore investment options with these 10 tips for developing vacant land.
1. Have a Plan for Vacant Land
Make a decision early on what you are going to do with your vacant land. Whether you want to build on the property, grow crops, raise livestock or have timber will determine how you choose the right plot. A little planning lets you make a land search based on the activity you intend to enterprise on your acreage.
Having a development plan is also beneficial when you are seeking financing for projects. Lenders are tentative when backing vacant land investments, seeing them as speculative. By having a clear strategy, you can justify loans or other financial assistance.
2. Be Prepared For Drawbacks
As with any investment, there are pros and cons for which you should take within your stride. Remember that vacant land is an illiquid, long-term investment with few tax advantages and can’t be depreciated. If you fail to evaluate the undeveloped property before buying, your investment strategy can get derailed, and a fast sale equals loss.
3. Consider Value Addition
While there are factors that affect vacant land value, it can sometimes be a complex attribute to determine. For instance, the lay of your land, size, depth, and shape can bring challenges to access or development. The location of your acreage can also determine value, and a critical factor will be the presence of a stream or pond on your raw land, which adds its value by nearly 100%.
4. Make Proper Cost Calculations
The sale price of your vacant land doesn’t sum up the costs for investment development as it’s only a part of it. Additional calculations will be factored in, including the cost of property surveying, environmental impact studies, permit fees, and building expenses.
Developing your raw land can involve bush clearing, soil assessments, and making access roads. There could be extra payments for installing sewerage or drilling wells, while utility hookups will cost depending on the remoteness of your untouched parcel. Besides location, there are other factors affecting the cost of utilities on land, including Government regulations. Those regulations may differ from state to state and end up in utility cost variation. For instance, there are some locations which do not permit using off-grid power sources, so you will need to pay extra to connect to the grid.
5. Time Your Vacant Land Development
When developing untouched land, timing can be everything. It doesn’t make sense to develop your property when a housing surplus or the agricultural economy is shaky. You must weigh-in factors that you can’t control, such as the availability of tenants if you’re looking to turn your raw land into a residential investment.
Wait for the proper market temperatures, or when the economy is booming to start developing your parcel of vacant land.
6. Watch Out For Zoning Issues
You may have to get your vacant land rezoned if your intended plans don’t fit in with the current local regulations. Rezoning raw land can take a while, plus there’s paperwork and permits to process. Planning your investment strategy before purchasing the acreage will save you from this potentially costly waiting game.
7. Hire a Professional
In all of your vacant land development agendas, your projects are better off overseen by an expert. As an investor, you don’t have all the answers. You also don’t have the time to be in all places at once. A skilled and reliable professional such as a project manager or construction contractor will take the weight off your shoulders while ensuring the success of your development.
8. Keep an Eye on Topography
Engineers know the saying that ‘nothing runs uphill.’ Any design can appear efficient in the first stages of your vacant land development but not suitable for later phases. Understand your parcel’s topographical map. This helps uncover the hydrological and geological aspects of your undeveloped plot. A survey may produce assessment photos, and together you can determine issues that have affected the property over time.
9. Explore Creativity
Think outside the box when getting your vacant land development project underway. Don’t miss opportunities to increase your investment return by failing to incorporate design nuances such as recreation amenities or conservation efforts that bring revenue.
10.Keep a Finger on the Pulse of the Market
Your raw land development will be a success depending on what the market trends are. If you are creating residential options, it’s good to know what buyers are looking for. There’s always a current supply-demand gap for which your vacant acreage can bridge or provide profitable solutions.
Conclusion
Access to utilities, including water, electricity, or phone reception, is essential, while trees, good soil drainage, grading, and contour are also important. Don’t be fooled by a good view, as when you decide to develop your vacant land, it may cost extra to build on hilly ground.