Contrary to popular belief, land investment is not pointless. And that’s not the only misconception people have about vacant lands.
4 Land Investment Misconceptions
- Land doesn’t ensure cashflow
One of the biggest misconceptions about vacant land is that they are unprofitable and do not generate cashflow. Well, in a sense, it is true. When you don’t have a clear goal, you won’t be able to generate cash. But if you are willing to put some thought into it, there are many options for you to pursue and generate cashflow with vacant land.
For example, you can rent the land to a billboard company if the land is near a traffic hotspot. On the other hand, if your land is close to a park or a public place, you can rent it to mobile homeowners. You can even lease them to farmers if the land is big enough and is in a suitable environment.
- Land has a specific value that can be easily calculated
Calculating the value of a home may be difficult. But it’s doable. Even if you don’t want to do it yourself, you can always take professional help to appraise the home.
But with a vacant land, it is more complicated. When you are determining the price of a house, you have comps to look at and come up with a figure. However, when you are calculating the value of vacant land, you don’t have enough properties to compare. Not much happens to vacant land. So, there’s not much to go on for calculations, which leads to a lot of guesswork.
- Mortgages are offered to buy vacant lands
Getting a mortgage on homes is relatively easy. Banks and lenders are usually not looking to lend on land though.
Lenders and banks don’t see vacant land as a profitable venture. They also see them as a risk. That’s why getting a mortgage to buy vacant land is difficult. However, if you have a plan to do construction or any revenue-generating idea that you’re going to implement right after buying it, you can pitch that to the lender. If they see merit in your venture, you might get approved.
- You should only buy land where you live
When you are buying a home, it’s always advised that you buy a house that is closer to your workplace. The reason behind this is very straightforward – less commute. But when you are purchasing a vacant land, you don’t necessarily need to worry about the commute since you won’t be driving to the land that often. Usually, when someone buys vacant land, he rents it to billboard companies, hunters and farmers. Unlike a home or a condo, it doesn’t require that much maintenance. Once you rent it out to someone or a company, you won’t need to check up on it regularly. So, the land doesn’t have to be close to where you live. However, if you plan to build a house to live in, you should plan to get the land close to your workspace.
