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Land Still a Good Investment

Typically, when people hear the word “investment,” words like stocks, bonds and mutual funds are the first things that come to mind. But real estate, real property and acreage are also investments. Alright, so why is land a good investment? I think the answer is quite simple – it has few drawbacks, it doesn’t depreciate and it can be a much better approach in a lot of ways than other asset classes. In certain cases, you can sit on a piece of land in a good location and it will appreciate over time. Think – land in areas where development and growth is more than likely in the near future. For example, my mother owns a piece of land with a small building on it. A few years ago Wal-Mart swooped in and built one of their big box retail locations across the street. The value of her land has now increased. Although, at the time she was probably thinking, “why didn’t I buy THAT piece of land across the street!??!” But, the moral of the story is that if you purchase land in a good location there is an excellent chance for appreciation and perhaps you’ll get to sell it to Wal-Mart or Home Depot one of these days! This would essentially be the theory of “buy, hold and sell.” Buy land that is sitting in the growth path of a highly populated area. When the time is right and the buyer comes along, get ready to sell, baby, sell.

Another great reason to buy acreage is the return it can offer you if it is parceled. This is an excellent way to increase your profit. A friend of mine in the real estate industry recently told me a story about a gentleman that purchased a piece of land for his future family so that they could one day build a home. The price was nice and there happened to be an even larger piece of land across the road. He went ahead and purchased that too, for about $400,000. Several years passed, and the more densely populated city near him began to expand and “exurbs” were in high demand. I think you can see where I’m going with this, but he was able to parcel that land off into 10 pieces and sell each piece for about $350,000. I don’t know of any mutual funds or CDs that will give you that kind of return.

Also, if you’re planning to hire a professional to assist you in locating purchase worthy land, do your own research and make sure they are well-versed in pricing, contract jargon, negotiation and due diligence. There are too many scammers out there looking to make a quick buck. But the ones that know their stuff are out there too and are well worth the money spent.

I named this series “under all is the land” because when you step back and look at it, people live, work, play and maintain every aspect of their existence on land and there are no opportunities to create more of it. So, if you’re in a cash position right now, lucky you, because cash is king. Prices are low and sellers want to sell. In my next installment, we’ll discuss the how-to’s of buying acreage. Until then, under all is the land!

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Tuesday, February 24th, 2009 Land Talk