Land development is a riskier yet more rewarding form of real estate investing. Many new investors assume it is only an option for experts, but I’m afraid I have to disagree.
I believe that land development can be undertaken by new investors that are eager and motivated. I won’t lie, though; a lot more work goes into raw land development.
There is an inherent risk to the strategy, but that can be said about most investment strategies. One of the main benefits of land development is that raw land is not an infinite resource, and it will continue to grow in value.
With all of that being said, let’s get down to my top tips for land development.
Pay a lot of attention to what is happening in the local area. If there are a lot of buildings present, new businesses and houses being built, then the land will be more sought after.
So pay attention to the surrounding markets to time your purchase, and get the right price. Form connections with locals that are in the know about things like these. I can’t overemphasize the importance of having a solid network, no matter what kind of real estate you’re investing in.
Before you get started investing in real estate, especially with raw land development, you need to know what you’re going to do with the land. Are you going to hold the land and then sell it to someone that wants to build on it?
Are you going to build something? How much will it cost to build? Will you need to purchase permits? How much is maintenance going to cost afterward?
Be honest about every single one of these questions, and figure out the numbers. This is crucial to know what kind of price tag you should aim for when you make your purchase.
I mentioned zoning, but let’s talk about it a little more. Certain areas will only allow certain buildings.
So let’s say someone purchases land, expecting to build a commercial property or even sell the lot to a commercial business. Then they find out that only residential family homes can be built there.
Their entire plan has been flipped on its head and has become highly uncertain. Zoning is part of due diligence so ensure you do your research and triple-check everything. Don’t take someone’s word about zoning laws; go out and make sure you know the truth.
As always, I recommend some kind of leverage when it comes to land development. Leverage is one of the most valuable tools in real estate and is recommended by most professionals, including myself.
The profit increase is just too significant to ignore. Most of the time, lenders will cover about 80% of the cost, sometimes up to 85%.
Marketing is a highly versatile subject, but it’s vital. No matter what business you are in or what you’re selling, marketing is the difference between success and failure.
You could write the prettiest song in existence, but if you only get ten people to listen to it, then your time will have been wasted. So, invest in marketing.
Talk to marketing experts, study the locals (again), advertise in newspapers, local websites, social media, etc. Do not skip out on your real estate marketing campaign, and do not underestimate the importance of a strong marketing strategy.