How to Invest in Vacant Land

Real estate investments are not always rental properties. In some cases, vacant land poses the potential for income. Vacant land tends to be more of a long-term investment with either building construction or resale to another buyer as the main sources of income. Understanding what to look for when buying vacant land can eliminate risk and clear the way for profits.

Step 1

Locate a reputable real estate agent who specializes in vacant lots and land. Traditional agents may not be familiar with local ordinances and zoning laws essential to the development of a piece of land. Rather than get stuck with land that requires a hefty investment to get it up to code so building can begin, have your agent find you a plot that is build-able from the start. Determine what you will be using the land for and explain it to your agent before starting the search.

Step 2

Ensure that your land is accessible without the need for an easement. In some cases, vacant lots are set within the boundaries of land owned by another investor or a homeowner. If you must cross land owned by someone else to reach your own property, you may find yourself at the mercy of your neighbors on a daily basis. You may require an easement, or permission granted by the owner and the local government for purposes of access and use. While not always difficult to obtain, easements are a hassle you don't need to deal with.

Step 3

Determine what you should spend on the vacant land if you plan to build in the future. Twenty percent to 30 percent of your overall budget is what should be spent on the land, leaving 70 percent to 80 percent for building costs.

Step 4

Secure a loan with a local lender if you plan to mortgage your vacant land purchase. Traditional mortgages do not typically apply to land so expect to pay a higher interest rate. Your real estate agent should be able to locate a suitable local lender and help you with the specifics of your loan.

Step 5

Ask the local utility company if it will be able to supply your land before making the purchase. In some cases, utility companies will be unable to access a plot of land, or must install lines to get to you. If this is the case, you may be looking at an extended period of time and perhaps an investment on your part before things are up and running. If access is not possible in a timely manner, the value of the land may be severely impacted.

Tip

  • Vacant land is bought to create developments or other projects. On occasion there will be less demand than initially expected, leaving a builder with empty lots. If a builder is stuck with empty lots that have sewer, water and gas lines, and the property is zoned for building, inquire about purchasing a lot. You my be able to get a deal.

Warning

  • If you are investing in land purely for profit, the odds are you will make more elsewhere. Vacant land may rise in value over time, but the interest earned on your cash over the same period is likely to be more. This does not even take into account any interest you may be paying on a loan to purchase the land in the first place.

Photo Credits

  • Jupiterimages/Photos.com/Getty Images

About the Author

Robert Morello has an extensive travel, marketing and business background. He graduated with a Bachelor of Arts from Columbia University in 2002 and has worked in travel as a guide, corporate senior marketing and product manager and travel consultant/expert. Morello is a professional writer and adjunct professor of travel and tourism.

Zacks Investment Research

is an A+ Rated BBB

Accredited Business.