We land investors operate in a specialized business model within a very niche real estate asset class. With the ever-increasing number of entrants into the space, one might ask, “What is it exactly about the vacant land niche that attracts so many new investors?” “Is this a hidden honey well we’ve been missing?”
We’d never be able to capture all the reasons – there are far too many – but here’s our stab at the Top 6 Reasons why people enjoy investing in vacant land.
1. Risk/Return Profile
The first thing an investor notices in this niche is the potential ROI that one can achieve. Buying from motivated sellers creates an incredible amount of margin, even when selling at a slight discount to retail market rates. In other asset classes, the investor would have to assume much greater risk to achieve similar ROI levels. With land, however, you can acquire property on such a low basis that your risk is significantly mitigated. Additionally, because the purchase price per property is typically lower with vacant land, the investor can spread his or her risk over multiple properties across several counties/states. With vacant land, you can purchase more and risk less.
2. Low Barriers to Entry
Land is relatively cheap. Be it a $1,000, $10,000, or $100,000 acquisition, there’s a low barrier for investors to acquire property relative to other asset classes. Similarly, land investors can maintain a thriving business with minimal operating expenses/ overhead. It’s difficult to pass on incredible benefits like this!
3. Efficiency and Automation
The incredible software tools available today allow land investors to streamline the full lifecycle of a transaction. From sourcing, due diligence, and closing, through to marketing and selling, the operator’s efficiency is limited only by his knowledge of the right tools and proper execution. With the digital world as it is today, it simply makes sense to opt for an automated investment.
Unlike many other business models or investment strategies, vacant land investment is extremely scalable. The operator can increase his or her production/profit while changing their structure or processes by a relatively insignificant degree. They may need outside capital, but internal processes should always remain relatively unchanged.
5. No-hassle inventory/property
Unlike single-family residential or other commercial asset classes, vacant land is simple. There are no tenants to deal with and no property maintenance to worry about, saving you a huge amount of time and money. This benefit thrives on what makes it cheap – its vacancy!
6. It is a Finite Resource
This is one of the most persuasive reasons to invest in vacant land. As vacant land supply is limited and becoming more so each day, its demand is bound to increase enormously. An investor can buy vacant land in an area for a cheap price and see its value skyrocket in the years that follow.
A Sound Investment
Land investing favors those with strengths in diligence and organization. Those who are naturally process-minded and detail-oriented tend to be successful. We like to think our strengths are in line with these characteristics, so we find particular fulfillment in this space. Additionally, we enjoy the people in the land investing niche. Especially compared to other asset classes, we have experienced a collaborative and friendly bunch of like-minded investors and entrepreneurs.