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Investing in Land
July 2nd, 2009
Investing in Land
Issues that make investing in land so risky?
* The majority of raw land purchases generate no income during the period of ownership, thereby creating a negative cash flow situation due to the accrual of ongoing property taxes.
* Because land is fundamentally considered indestructible, there’s no depreciation allowed for federal income tax purposes.
* The municipality in which the land is located governs by zoning how the land can be used.
* Development of the land is also subject to environmental testing and regulations.
* Raw land is the most illiquid investment of all of real estate; which, as a whole, is considered to be an illiquid investment genre. It can take literally years to sell some land parcels, and others truly may not be marketable at any price.
With such negative factors why do people continue to buy land you might ask. The answer is simple, money.
In America and around the world, vast riches have been made in land for hundreds of years. Land can be purchased relatively cheap and with little or no effort double or triple It’s value. Foresight and knowledge play a very important role in successfully investing in land. And sometimes it’s all luck.. to be continued