It may well be an old investment chestnut that Mark Twain created when he stated that you should “buy land, they’re not making it anymore”, but he definitely has a point. The universe might well be expanding but down on planet earth, if you are a landowner, it is up to you to make the most of what you have got if you want to maximize the value of what you have.
Properties built on land are one way to add value, see this from Taylor Estate Agents as an example, so what are the best ways to grow money and get the most out of a piece of the planet that you can call your own.
Land in its Raw State
Aside from the obvious satisfaction of standing on what amounts to your private acreage and enjoying the knowledge that you are a landowner, it makes sense to develop a strategy to try to make the most of what you have got, so that your parcel of land becomes worth more than you paid for it.
Land investments don’t tend to fluctuate quite so wildly as share prices, so there is some stability and the opportunity to grow your wealth at a steady rate when land prices appreciate over time, but there is often more earning potential in putting the land to some sort of use.
Aside from renting your land out for farming if it is suitable, which will generate an income, if you want to develop the land that you have you will have to develop some plans to do so.
Even creating a set of development plans that have been approved by local authorities, can add considerable value, without you having to do any further work yourself.
Gaining permission to build some houses on the land or some sort of structure, will immediately make your piece of land much more attractive to a property developer who may want to buy the land from you, in the knowledge that there is a profit to be made further down the road by selling the houses they plan to build.
This is not a bad strategy if you are looking to make a profit from the land and move on, but if you plan to hold onto your land, there are other ways to get it earning an income and adding value.
In it for the long-term
If you are buying raw land, it is worth pointing out at this stage that although it can certainly be a financially rewarding strategy, you may have to be patient and there are not always attractive tax advantages to enjoy either.
Depending on local laws applicable, it is possible that your raw land might not be able to be depreciated and in general terms, purchasing raw land should be viewed as a long-term investment which is fairly liquid and will often take some time to enable you to generate any profits, even when you start development plans as soon as you acquire it.
The classic real estate rule that location matters, certainly applies just as much for land as it does for buying houses, but there are also other factors that can influence and affect the value of your land.
Owning an oddly shaped parcel of land can sometimes be viewed as negative, because it can make development more challenging and therefore not so attractive to an investor. In addition to choosing a location that has proven to be popular and demonstrated growth in values over time, aim to buy land that has a certain amount of uniformity about it, and easy access to services like sewers, water, gas and electricity.
Adding services to a parcel of land can be very costly if the land is not in an accessible location, so it should be a consideration when you are evaluating whether to buy a parcel of land or what you want to do with land you already own.
Add some Trees
Trees can add value to your land, and if you add a lot of them and create forestland for timber sales, that could allow you to generate an annual income as well as enjoying capital growth as the value of your land appreciates.
You could consider leasing your land for someone to develop the land for timber sales or you might decide to invest in developing the land yourself. Whatever you decide to do, owning land can be a good way to grow money, if you get it right.
Jay Ashton has worked at a property auctioneer's for several years, with land as well as property coming under his hammer every month. His articles focus on property investment, as he discusses the market and what to look out for.
Brian is a dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013 who, with his family, has successfully paid off over $100K worth of consumer debt. I want my three children to handle money better than I ever did at a young age. I have been teaching them as much as I can for the last 10 years. My goal is to continue to champion the financial literacy message and then why I created the “How To Rock Your Money” book. To help teenagers navigate their financial futures. I hope my family’s story of paying off over $100,000 worth of debt will inspire and motivate you to take control of your money. He blogs at BrianBrandow.com