Many small investors are interested in the idea of investing in land. However, residential and commercial land development projects are rarely feasible options for those who want to enjoy the traditional sense of land ownership.
Instead, many new investors choose to invest in raw land. But how can you evaluate a piece of land for its potential as an investment?
Location
Land can be a good investment if you know where to look for it. A commercial listings platform can help you find the right property. These online platforms offer various options, including land for sale, office buildings, military holdings, and more. Many of these sites also allow you to narrow your search based on location, type of property, and price range.
One of the most popular online listing platforms for land is LoopNet. Featuring thousands of properties across North America, the site lets you filter by state and price. If you want to narrow down your search further, you can add a particular keyword or broker. Other areas specializing in different property types, such as hunting land or waterfront property, are worth checking out.
Another good option for finding land for sale is LandWatch, a website with over 1.4 million listings of hunting grounds, timberland, and other property types. It offers a clean interface and map tool, as well as a variety of other filters. Similarly, CREXi touts itself as “The Advanced CRE Marketplace,” allowing users to select more than 15 asset types, including land for sale.
Land for sale in New York can be a significant investment, especially if you plan to use it for agriculture or recreational purposes.
Taxes
When investing in land, you may be slapped with a tax bill once the property is sold. But there are strategies you can use to reduce those taxes.
First, you must realize that the IRS considers land a capital asset. When you sell a capital asset, you pay taxes on the difference between the sales price and your original cost basis. The taxes you pay depend on whether the sale is long-term or short-term and on your income tax bracket.
If you itemize deductions, you can deduct interest and property taxes paid on the vacant land. However, if you’re a non-itemizer, you must make an annual election to add these expenses to your land’s cost basis or “capitalize” them in tax jargon. Adding these expenses to your property’s cost basis can significantly reduce your taxable profit when you sell the land.
Depending on your goals for the land, you can hold it for several years before selling it. This can minimize your taxable gain by spreading the payments over time and lowering your upfront capital gains tax bill. However, you should consult a financial advisor to find the best strategy for your objectives. For instance, you can avoid capital gains taxes by placing the land into a trust or other tax-deferred vehicle.
Size
Buying land for sale in Texas is about more than just the price tag. It’s about your dream for your property and what you will do with it once you own it. As you browse listings, you’ll imagine how the sun rises over a rocky mountain peak, or your home will look nestled into tall beach grasses. These thoughts, desires, and fantasies set the stage for how you’ll browse property, what types of properties you’ll visit, and which properties you’ll offer.
The land is unique because it is something you can touch. You can see and hear how the breeze moves through the trees, how the sand feels under your feet, and whether or not you’ll be able to make a little beach house from the debris that piles up in front of it. Then there’s the added benefit of knowing it’s your property and no one else’s.
Many people invest in land because they want to build a custom home. Purchasing raw land is often less expensive than a lot with an existing house and allows you to design your home. Then, once it’s finished, you have a property that will appreciate and can be used to generate income through renting or leasing.
Potential
When investing in land, it is essential to consider the investment potential. Raw land can be developed into several things, including homes or commercial properties. These developments can produce a variety of revenue streams for investors, including rent and property appreciation. The success of any land investment depends on due diligence and careful planning.
Investors should also assess the building conditions of the land they are considering buying. This includes determining whether there are any utilities available on the site. Ideally, the ground will have access to water, gas, and electricity. If not, bringing these services to the property can be a significant expense. Investors should also be aware of any zoning regulations in the area and the type of development that can take place on the property.
Several online platforms specialize in listing land for sale. For example, some allow users to search for land based on state, price range, and acreage. It also offers builders, developers, and real estate agents extra resources. Other online listings feature a clean interface and map tool with multiple filters.
When looking for land for sale, investors should consider market trends. For instance, if prices are increasing in a particular region, buying the land now may be more profitable than later.
