Ever since the pandemic began, it's become harder for people to buy real estate, mainly because of high home prices and competition due to low supply. With inflation rearing its ugly head, it becomes more important than ever to own real property, which tends to hold its value. No one can print more land; there's a limited supply.
Here's an interesting aside: The other day, Realtors at my brokerage were discussing their experiences with Opendoor. This iBuyer has been offering and oftentimes paying more than list price for homes, including "as-is" homes. If you remember, Zillow tried this tactic too and failed. But Opendoor is doing well, buying houses like nobody's business, and had positive net income in the third quarter of 2021 while doing so.
Opendoor makes money by flipping homes. It also sells to institutional investors who then rent out the homes. Institutional investors, particularly in certain markets, such as Atlanta, have been buying an increasingly larger amount of houses for sale. In McDonough (an Atlanta suburb), for example, iBuyers flipped an incredible 70% of their housing stock to institutional investors, many times without even listing the homes for sale. We mom-and-pops can't compete with that.
Instead of giving up, there's another tactic to consider if you've been priced out of the homebuying market or keep losing out to competition -- and that tactic is buying land.
Image source: Getty Images.
Buying vacant land
When you buy vacant land, that's it. You don't have to do anything with it until you're ready. Of course, you might not be making any income right away, but the cost of owning land is much less than owning a house. You pay only the property taxes and maybe insurance. Also, the competition to buy land is typically much less. The main thing is you would own property.
Just as when buying a house, when buying vacant land, location is important. You might want to work with a real estate agent who specializes in negotiating land deals if you're new to this type of investing. Also, be prepared to pay cash for the land, or 50% anyway, as you won't get typical mortgage deals when buying vacant land.
What to do with your land investment
You have many options once you own land. One is to simply sell the land when it appreciates. While you're waiting for that to happen, depending on the location, you can grow crops, use the land as storage, or lease it.
You can also develop the land based on the highest and best use of the property. To do this, you need to be able to answer four questions:
1. Is the intended use physically possible? The topography of the land determines what can and cannot be built.
2. Is the intended use legal? There could be zoning restrictions.
3. Does the purchase make sense financially? This requires a market analysis. You need to know construction costs of various projects and what the likely income potential might be, such as how much rent you could get.
4. What is the best use of the land? Once you understand the ramifications surrounding the land and have figured out your numbers, you can determine the best strategy to take.
You don't need to invest only in stocks. There's gold, silver, real estate, and even crypto (it has the potential to become a safe-haven asset). In these changing economic times, it might be wise to own something tangible.
