What are the types of raw land investments?
Investors can buy raw land that will be used in the future for residential development, commercial development, grow crops, mineral production, timberland, livestock-raising, orchards, recreational land, vineyards, vegetable farmland, industrial development, parking spots, etc.
Why should investors purchase raw land?
Purchasing land can produce a tremendous return on investment. Why? Land is scarce. For example, think about the previous owner of the land the Staples Center sits on. Imagine the payout that owner received when the Staples Center approached him with the intention of buying his land for development. The goal is to buy land in a prime upcoming market with population growth and metrics that show signs of future economic prosperity. Why? This will allow the investor to get in at a discounted price and benefit from the value of the land appreciating over time.
How to invest in raw land?
Investors can invest in raw land with numerous different strategies. The first strategy is called buy and hold which means investors will acquire a parcel of raw land and hold it until they can sell it for a higher price. The second strategy is called flipping land which means investors acquire raw land and increase their property’s value by preparing the raw land for a development project. Real estate developers pay big money for raw land that is ready to go for a development project as it saves them time and money. The third strategy is buying raw land to develop the property. This strategy is more common amongst experienced real estate developers.
How can small investors invest in raw land?
Investors who aren’t capable of allocating the capital to acquire a piece of land can still benefit from these opportunities with the purchase of Real Estate Investment Trust (REIT) shares. As a shareholder, you will benefit from the land’s appreciation and dividends.
Real Estate Investment Trusts (REIT)
Vanguard REIT ETF (VNQ) offers small investors the opportunity to be invested in a diversified portfolio of raw land developments in different property types. The VNQ ETF offers investors a dividend yield of 4.03%.