You can make a fortune on earth. Having said that, I am not going to sugar coat what is probably one of the most difficult types of real estate investing. The reason you can double, triple (or more) your money on land is because it is one of the most misunderstood real estate investments. This provides an incredible advantage if you know what to look for and what to do because very few people understand the land. However, this is no different than any business. Think of used cars, for example. If you know cars inside and out, you will be able to buy a car cheaply from a person who sells his car and doesn’t know its value. You can then turn around and sell it for a profit. You have capitalized on your knowledge. Also, you can fix the fender, polish and shine and even make more money by creating more value. The same applies to land. You buy from someone who doesn’t understand what can be done with it and you capitalize on it.
The key elements to making money with the land are the following:
1. Know your market. Don’t even think about buying land outside of the market area you know intimately. Little things can trip you up even if it seems like nothing can go wrong. Start looking at every parcel of land in your market.
2. Dream team. You can’t do it alone. You will need to have a close relationship with a civil engineer, land attorney, zoning official, site contractor, real estate agent, and lender.
3. Understand what you sell. You have to know what kind of land is being sold in your market and at what price. You will need to have better quality at a lower price. Land is the hardest asset class to sell and has no cash flow. This is very important.
4. Know your zoning. Almost all towns have zoning regulations that describe in a table, in general, the basic requirements to have a legal lot (frontage, surface, setbacks, etc.). In areas without public water or sewer, you’ll also need to be aware of health codes, soils, and wetland issues. Essential to know.
and finally…
5.Create value. This is what it’s all about. You can buy a piece of land at a discount and turn it around or you can actually make money upgrading it and then selling it. Types of improvements include, zone changes, approvals for a building lot, subdivision, land improvements (access, landscaping, and beautification), free cuts, title mergers, and conservation tax easements, to name a few.
Once you have a target parcel of land, there is another important step involved, which is the Purchase or Option Agreement. How you structure this can make the difference between making money and making BIG money. But that is for another article.
Do not think that you are going to go out and make a fortune on earth without first having a lot of knowledge. They will hurt you. On the other hand, study and learn and you will benefit handsomely.
Go to my website http://www.realty-capital.us and read my course on education if you wish. I give specific examples of land transactions that I have done. Thank you!
