Pros and cons of buying land? (investments, mortgage, mortgage, sale)

[FLhvac]

Many of the “buying land” threads seem to be for specific states. This is more of a general thread on the subject. Over the last few years, I’ve been interested in owning some land, mostly for long term investment purposes. Even in todays market, many states seem to have large acreage lots going for thousands to the low-mid tens of thousands of dollars with only hundreds of dollars worth of tax to pay each year. A lot of these prices, to me, seem cheap relative to where I live.

I understand that there are lots of variables that go with this, but I’d like to get some opinions/general info on the subject from those that are involved with this. Is it really as simply as buying land, paying the taxes, and just hanging onto it? Are there restrictions or fine print involved? What about owning land out of state? How involved does an owner have to be with their property? Are there differences between owning land in a desert vs in the mountains? What about land with water (springs, creeks, lakes)? These are just a few of the things that come to mind.

On another note, are there ways to get alerts for properties that have been recently listed? There is a vacant lot behind my house that I was always interested in and I just found out that it was sold 3 years ago, so that was a missed opportunity.

[dontaskwhy]

That all depends on where the property is located. If there is a high demand for property in a particular area you might be able to sell the land for a tidy profit over a period of time. However, in my area there are developments where there are multiple lots sold in the middle of nowhere during the 70's and 80's by "hucksters" to gullible people that almost never appreciate much in value, especially if they are surrounded by unpaved roads/entrances.

[MortonR]

Also understand that unless you plan on paying cash, you're unlikely to be able to purchase. Very few lenders will loan money for undeveloped land regardless of where it is and what it's worth. You can get construction loans that will "wrap" the cost of the land into the mortgage at the end, but getting a mortgage on raw land is difficult, if not impossible for most people.

RM

[escanlan]

Originally Posted by FLhvac

Many of the “buying land” threads seem to be for specific states. This is more of a general thread on the subject. Over the last few years, I’ve been interested in owning some land, mostly for long term investment purposes. Even in todays market, many states seem to have large acreage lots going for thousands to the low-mid tens of thousands of dollars with only hundreds of dollars worth of tax to pay each year. A lot of these prices, to me, seem cheap relative to where I live.


It would be very hard to be "general" without involving the nuances of a particular State. One good example is your reference to land being cheap relative to your location. For example I know where I can buy a 100 Acre tract of land that is completely self sufficient and completely off the grid with modern conveniences and it costs WAY LESS than even a 2 acre tract of land here in most, if not all, parts of Texas. There are very good reasons for it.

• The State is large but has a very small population compared to similar sized States. That's because population shift really is not inward or outward and is fairly stagnant. As a result the value of the land really won't increase much if any at all for a long, long time.
• The property itself is in a very desolate area which describes much of the State to begin with even though it is a very beautiful State.
• Even though it is for the most part self sufficient the State laws are fluid and that can easily change even without population growth. State laws and attitudes become very important in choosing land.

In this one example the only thing this piece of land is good for is to withdraw from society until you either die or decide it just wasn't what you wanted to do. However now you're stuck with a pice of land you may never be able to sell. So that land is relatively cheap compared to where I am and for good reasons.



I understand that there are lots of variables that go with this, but I’d like to get some opinions/general info on the subject from those that are involved with this. Is it really as simply as buying land, paying the taxes, and just hanging onto it?



Again it depends not only on your State but possibly local government regulations as well. Again for example in Texas I can buy a 100 acre tract of land two or three counties away and without any special exemptions pay well less in taxes than the county I am in and with the exemptions available. Taxes have the potential of varying greatly around a State and with its use and absentee owner status.



Are there restrictions or fine print involved?



There may well be both or none but again it depends on what State and local in the State it is located. Other aspects to be familiar with are as follows but do not include all important aspects.

• What are the mineral rights laws for the property and will the mineral rights even convey with the deed. Last thing you want to do is buy a piece of land without the mineral rights not knowing what is below. That might result in a company who owns the rights coming onto your land to access the minerals without your approval.
• What are the State and local plans for infrastructure in/around the land you are considering? Is growth occurring in the area? What are the eminent domain laws for the State? Again you could wind up buying a piece of property just to find out later there were or are upcoming plans for the land you own. Case in point is an investor just bought a very large tract of land by me for a ridiculous amount of money. The County has plans to expand a BF country road into a 4 lane secondary road that will cut right through the property in a way that can reduce it's use potential and therefore its value. I doubt the road expansion will occur for many years as it isn't supported yet by the growth in the area. When it happens they will lose the land needed for the road and the question is will they profit from it or outright lose?

What about owning land out of state? How involved does an owner have to be with their property?



That can vary widely from State to State and even counties in a State. Obviously knowing these requires understanding the State property laws as well as a host of other laws.



Are there differences between owning land in a desert vs in the mountains?



Obviously there will be and will depend on so many factors that without specific property examples it can be hard to describe. A couple of very striking differences are as follows.

• What natural resources are available in an arid desert area that would even make it worth developing? What can you even do with the desert land until that occurs?
• With a mountain property how accessible is it throughout the year? What infrastructure is even there to access it? What can you do with the land until such time that it might be worth developing?

What about land with water (springs, creeks, lakes)?



These are desirable features depending on their area of land taken for them and their intended use. You would also need to know about a State's water rules. For example here in Texas there are restrictions on who actually owns the spring or creek and its water resources. Does the State own it even though it runs through your land? That can affect what you can do with the land that borders the water feature.



These are just a few of the things that come to mind.

On another note, are there ways to get alerts for properties that have been recently listed? There is a vacant lot behind my house that I was always interested in and I just found out that it was sold 3 years ago, so that was a missed opportunity.


Unfortunately there are so many sale sources for raw land and that too can vary due to the locality of it. There are also large land owners that may never advertise more than word of mouth depending on their urgency to sell. There will always be desirable tracts of land that you'll never know they for sale.

Answers/thoughts in blue above.



There are many, many, many things to consider if you are trying to buy land as an investment. If you have a whole lot of money to tie up potentially for long periods of time and/or a crystal ball and/or money and/or are young and can watch the valuation of your purchase then land for investing can be very tricky and costly.



Those that make short term (a relative use of the word) profits from land investments are those with deep pockets, lots of connections to identify/buy/sell the land, and/or are very lucky in the process. My little town is growing extremely fast and I have watched more than one person lose money on bad land investments here. Most of that tends to be "Pie In The Sky" wishful thinking with little to no thought going into the purchase.

[oregonwoodsmoke]

Originally Posted by FLhvac

........ many states seem to have large acreage lots going for thousands to the low-mid tens of thousands of dollars with only hundreds of dollars worth of tax to pay each year. A lot of these prices, to me, seem cheap relative to where I live.......

Large acreage for a low price are cheap for a reason. If you want to make money by buying and holding land, you must buy desirable land, preferably nice land in the path of progress to where the city will eventually grown out to meet it. Or highly desirable recreation land.



Possibly, it might be just buying and doing nothing but paying taxes, but also possible that you would need to do fire suppression (keep the weeds down) and I suggest keeping liability insurance in case some one who is trespassing gets hurt while they are on your land.


You have to check on boundaries to make sure neighbors are not encroaching and laying claim to part of your land.

[jackmichigan]

I recently purchased a large acreage tract from a family that had owned it for nearly 50 years as an investment. After they factored in all of the property taxes that they paid over the years, their profit was very small. I'm sure they wished that they had invested in something else.

[NORTY FLATZ]

With a property transaction, due diligence is more important than ever.

There are just too many factors to adequately describe even most of the possible situations you could find yourself. You gotta do your home work.