Investing in Land - Now is the Best Time in Years

Of all the investments I have made in real estate over the last 30 years, raw land has always given me the best return. Ive fixed up single-family rentals, I have owned apartments and have built many spec homes. Dollar for dollar, however, raw land has always yielded exceptional returns for my investors and me.

I remember one time a small group of us invested $12,500 each and purchased path-of-progress piece of land. We sold it two years later and each walked away with a check for over $250,000. The secret in that case was knowing where to buy, buying on terms and simply biding our time. Another case was where an investor put up $100,000 for some land my company was going to develop. He got his $100,000 back, plus another $200,000 within 24 months after we had received our development approvals. In this case, value was added to the land by dividing it into home sites.

There is no doubt that the housing market is in a major slump right now, and I think it will continue for at least another year or two. It has become extremely overpriced during the last 13 years and a major adjustment has been long overdue.

Because of the punctured real estate bubble, land-buying opportunities could be very profitable in the months to come. For example, big and small developers alike now find themselves overextended with too many undeveloped lots. Many have slowed their pace of buying new development land. A Florida-based company with $2 billion in assets is offering major builders 50 cents on the dollars for inventoried lots and unsold homes.

As someone famous once said, “buy when everyone else is selling and sell when everyone else is buying.” This particularly applies to land. I have already begun to see major price reductions on land.

While there are many factors involved in locating the right land, I believe that searching for bargains in the following categories can offer you tremendous financial returns in the next few years:

1. Land and lots owned by small home builders who have become over extended. Put together a partnership and offer to buy the builder out on a bulk sale. If possible, buy with an option or on terms.
2. Approved subdivision maps that have not been developed by the owners or developers. They have a limited life span. If not improved with infrastructure they will expire. This is not for the faint at heart, since there are many conditions attached and the infrastructure can be costly. However, the markup can be tremendous.
3. Emerging, small “quality of life” towns in the west. Purchase small acreage parcels on the outskirts of these towns that can be divided into several smaller rural parcels. Usually, the costs of improvement will not be significant but the value added can be quite large.
4. Consider land banking a larger, cheaper parcel of land located 5-10 miles from a downtown area along a major artery in the path of progress. Look for land that has been on the market for a long time and make a very low offer. Offer to buy on terms with annual payments at a low interest rate.

These are just a few of the areas where I see potential profit opportunities in the next 24 months. Be patient, do your homework and you can find your diamond in the rough.

Jim Copeland
http://www.jimcopelandbroker.com/

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