In order to be absolutely sure whether or not raw land investing is right for you, ask yourself the following questions:
Can You Manage Risk?
Although raw land investing is often predictable, as with any type of investment, there is always some risk involved. If you are easily overwhelmed by the unknown or someone who jumps into things hastily, raw land investing is not a niche you should pursue. When you invest in a plot of land, you are essentially predicting the future. The moment you put money down on the table, you are saying, “I believe that what I am buying into will increase in value overtime”. While, in theory, you are probably right, there are some things that are out of your control.
Are You Financially Organized?
When it comes to raw land investing you will likely not realize a profit as fast as you would with rehabbing or wholesaling. Because of this, it is crucial that you are vigilant about organizing your finances. This should not, however, deter you from undeveloped real estate. Raw land is a buy and hold investment by nature. Due to this, it can be a while before your land appreciates enough to produce cash flow. A novice investor must perform an honest evaluation of where you stand financially. If you are a seasoned investor, you must assess the state of your finances and how you want your business to grow. If you are inherently frugal and make money saving a hobby, it is likely that you will realize success as a raw land investor.
Will You Prioritize Research & Due Diligence?
Raw land investing is all about asking the right questions, and if you’ve never purchased vacant land before, you are probably not up-to-date on the jargon and terminology. Before investing in any land, it is vital to first research the market.
- Has there been recent development in the area?
- Is your plot of land in the path of future growth?
If the answer is yes to either of the above question, your property already meets some crucial criteria. Next, you should talk to your lawyer, the seller, and your inspectors about the zoning on the property.
- Are clear boundaries drawn on the plot?
- Is it zoned for commercial, residential, industrial, mixed-use, or agricultural development?
- What was the land used for previously?
Asking and getting specific answers to all these types of questions is an absolute must. Also be sure to ask questions about the
- land’s topography,
- required annual taxes,
- available public
- utilities,
- usage restrictions, and
- road access.
Minding due diligence and researching the right questions are what sets apart the successful raw land investors from unsuccessful.
Do You Have Support?
Unfortunately, raw land investing is not a “get rich quick” plan. It takes a lot of hard work and perseverance to realize success in the real estate investing world. This is why a solid support system is crucial to have. While it is important to rely on yourself as an entrepreneur, your own personal cheerleader is nice to have when times get tough. Whether this is a business partner, fellow investor, or family member, you are more likely to be successful compared to someone going into raw land investing alone. If you are having trouble finding your support system, consider joining a local REI group. You can even create your own Meetup.com group. Isolate yourself from the naysayers in your life and find people who are there to help you stay motivated.
Summary
Real estate investing inherently coincides with a certain degree of risk, and raw land investing is no exception. Those who educate themselves on the topic can not only gain the confidence needed to begin, but also the expertise required to succeed. Learn how to finance a raw land investment, research the best type to buy, and determine how to proceed after investing in land. These steps could help you unlock sizable profit margins from an underutilized real estate investing strategy.