Are you sick and tired of watching your hard-earned money continue to regress in savings accounts? Based on the fluctuating stock market, you are probably lying awake at night wondering if your investments are safe.
Most of us fantasize about creating something lasting that will generate wealth, but we aren’t certain how to get started. We all deserve a stress-free, built-in investment that will build along the way, without worrying about market crashes or hardship. Maybe it’s been around you and could be your key to growth – Land!
With the right land purchase, it is possible to create generational wealth. Let us illuminate some of the economic benefits this will provide you, as you might just find what you need financially.
1. Asset Appreciation and Long-Term Investment
Land is a limited resource; over time, land tends to increase in value, especially as economic growth puts upward pressure on demand and available parcels become scarcer. This is vital to include in your financial plan.
Unlike buildings, Land development doesn’t depreciate. Land generally stays steady in value or even increases, and is thus a good long-term investment in which to create wealth. The buy-and-hold strategy works really well with land because on the other side of patience for investors, and those that are patient can often get compensated greatly for their wait as appreciation takes hold. There are many more examples of raw land purchases having a better growth profile over time than developments.
Let’s look closely at the many avenues in which land can produce revenue while you wait for appreciation.
2. Income Generation
You don’t have to wait years to get a return on your land investment. Landowners can bring in revenues from their land by leasing their land for farming, ranching, hunting, recreation, or renewable energy projects, like solar or wind farms. You lease agricultural land, for example, and there is a steady stream of rental income that can operate much like dividend stocks or rental properties. This generates income but can also generate capital appreciation.
Besides these types of revenues, the private sector tends to offer opportunities for temporary uses, a one-off event or a storage company. Cell tower companies pay very well at the right location. All of these can be used to generate passive income to help generate revenue streams on top of regular income.
And then there are the tax benefits of owning land.
4. Enhanced Borrowing Power and Financial Security
Land is a real, appreciating asset that could be used as collateral, thus increasing against inflation and the market because it is tangible and a store of value that remains stable, thereby increasing your borrowing capacity for additional investments or business opportunities. It also acts as a hedge against an economic downturn. Land usually holds or increases its value during inflationary times.
This tangible asset can be used as a store of wealth while other investments lose purchasing power. The legal protection of property ownership is among the strongest in the world. The American legal system protects land rights and land ownership claims. This sort of stability provides benefits that intangible investments simply cannot replicate.
Land and land ownership can also contribute to your family’s security for the future.
3. Tax Benefits
Strategic land ownership can offer us a variety of tax incentives. Depending on how the land is used and maintained, rural land ownership can provide extensive tax benefits such as a property tax deduction, capital gains tax exemptions, and tax deductions for certain maintenance or land improvements.
Agricultural land or conservation land can provide even more credits or lower tax rates, making land ownership even more attractive economically. Many investors will use 1031 exchanges to defer capital gains taxes when they are selling one land investment property and reinvesting into another land investment property. This type of tax shelter can greatly enhance total returns on land investment.
Having land is a type of financial security.
4. Development Potential: Transforming Raw Land into Higher Value Assets
Careful development can often increase property values significantly. Often raw land can generate a lot more upon newer, higher, and better uses of the property. Finding the growth patterns of neighbouring urban areas can be beneficial in identifying opportunities.
Purchasing raw land that is located in the path of development can pay you back greatly. Typically, larger parcels of land, when divided into smaller, more marketable lots, can result in large profits. Using zoning that permits more intensive uses of the land can quickly increase a property’s lot value. As little as building road access or adding the existing services (water, sewer, electricity) can be used to increase the value of the land significantly.
The area where you place your land investment is important in being able to demonstrate its economic value.
5. Strategic Location: The Key to Maximum Appreciation
Identifying land in high-growth corridors can also increase appreciation. Regions with economic development initiatives currently underway typically have good opportunities. Areas where the private sector is expanding also need special attention. Generally speaking, property in the vicinity of new infrastructure projects typically experiences the highest property values.
It is also very important to understand how to view the migration of people when choosing a location. Land close to rapidly expanding communities needing housing and services will likely lead to returns in value. Land within commuter distance to employment centers with growing employment situations often appreciates faster than more remote locations.
Let’s now consider how land ownership can lead to supporting your financial planning for the long term.
6. Estate Planning and Generational Wealth
Land is a tremendous asset to leave to heirs, often with a “stepped-up basis” that reduces the capital gains taxes for the next generation. Land is also a “base” for building and passing on family wealth, providing diversity, security, and opportunities to those who come after you. Careful land transfers will create multi-generational wealth for your family.
Many of the families of wealth had their beginnings due to strategic land acquisitions as investment properties. Choosing the right piece of land to hold onto as a legacy will benefit your children and grandchildren for years, if not decades, to come. There is a certain emotional fulfillment in knowing your family will enjoy the same property for generations. Land often appreciates significantly over a generation, providing large wealth accumulation over time.
The practical aspect of land as an investment is exciting.
7. Low Carrying Costs and Flexibility
In contrast to improved properties, vacant land typically has very few or no ongoing expenses, such as a mortgage/installment (or no other maintenance). Owners usually have the flexibility to hold it, build on it, or sell it later as their needs change and/or as market conditions change; this continues to give owners control over their land and money.
Many investors like the fact that raw land is more straightforward than a complex investment approach. As a real, tangible asset, the investor can visit it and enjoy it, unlike some forms of investments. Land investing is relatively straightforward when you compare it to market timing (when to buy or sell) with the stock market (trading). It is important to emphasize the relatively simple approach in comparing raw land investments to other investment opportunities.
Now, let’s take a look at how land can be compared to other investments.
Investment Comparison: Land vs. Traditional Investments
Land investments are an excellent way to diversification for your portfolio. Land diversifies your portfolio more effectively than stocks and bonds because land typically performs differently, and better, during a recession. Historical land investment has less volatility than many financial instruments.
The tangible nature of land provides a stability that paper assets cannot provide, along with the comfort for many investors in owning something that they can see and touch. In fact, it is no coincidence that many of the world’s millionaires own a substantial portion of real estate in their financial portfolios for these reasons. Please see the table below for a summary of some of the key economic benefits of land ownership:
| Economic Advantage | Description |
|---|---|
| Appreciation | Land value tends to increase over time, especially in growing areas. |
| Income Generation | Lease for farming, recreation, or energy projects. |
| Tax Benefits | Dedications, exemptions, and credits for rural/agricultural use. |
| Borrowing Power | Land can serve as collateral for loans or other investments. |
| Estate Planning | Facilitates generational wealth transfer with tax advantages. |
| Low Carrying Costs | Minimal ongoing expenses compared to developed properties. |
| Flexibility | Hold, develop, or sell based on personal or market needs. |
Case studies provide real-world examples of these monetary rewards.
Success Stories: Real People Building Wealth Through Land
We can all learn from the experiences of successful landowners. For instance, this family bought 100 acres of land in rural Colorado thirty years ago for $50,000 and just sold one-third of it for over $500,000.
Many towns have transformed from small rural areas to economic hubs, continuing to provide fantastic returns and appreciation for their early landowners. There are dozens and dozens of examples of ordinary people creating financial security for themselves through land purchases.
With a little research and time, you can also have similar stories.
Of course, there will be factors to consider with any investment.
Getting Started: Your Path to Land Ownership
Starting the process of buying land is just a few steps away! Look at your budget and financing opportunities, keeping owner financing in mind for less of a hurdle. Research areas that will allow you a good return on your investment. Working with professionals who are experts in the land, rural, and underdeveloped land markets will offer you a big bang for your buck.
With owner financing programs, the common man can look at properties for as low as $100/month. It might shock you how affordable raw land can be, on a monthly basis, especially in states like Oregon, Arizona, New Mexico, Colorado, Texas, Arkansas, Nevada, and Florida. With the right partner to help you, this is really more accessible than you likely imagine!