Real Estate Investing: Bare Land Investment
Airfare Daily Deals eCigarettes Eyeglasses Hotels Jewelry Online Backup Online Dating Online Printing Online Tickets Skin Care Textbook Rentals Vitamins Web Hosting Weddings
Find thousands of shopping-related forums
SEARCH

Real Estate Investing: Bare Land Investment

Those who invest in bare land go by various names. Those who buy bare land, build on it, and then sell are called developers. And those who buy broken-down buildings, scrape them off the land, and then build new structures are often fixer-upper specialists. And those who buy bare land and then resell it for a profit without developing it are often called speculators.
               bare land investing for real estate

Image Credit

Do I understand what bare land investing involves?

Those who invest in bare land go by various names. Those who buy bare land, build on it, and then sell are called developers. And those who buy broken-down buildings, scrape them off the land, and then build new structures are often fixer-upper specialists. And those who buy bare land and then resell it for a profit without developing it are often called speculators. This also tells us the basics of what can be done with bare land.

Is it hard to buy?

In some ways, it's the hardest real estate investment to make and, in other ways, it's the easiest. The basic problem is in financing. While there's a whole system in place to handle mortgages on homes and even commercial property, nothing like that exists for bare land. Rather, about the only place you can get an institutional mortgage on such property is from a bank. And even then, the maximum LTV is often only 50 to 60 percent. That means that you as an investor must in some way handle 40 to 50 percent of the sales price - an impossible burden for most investors. That's the bad news. The good news is that most sellers of bare land are well aware of the problems involved in disposing of their property and are more than willing to help out. Often, they will finance the entire sale. Other times, they'll take back a second mortgage for a large part of the down payment. They're not altruistic. They realize that this may be the only way to sell such property. And besides, they probably bought it for cash years ago and most of the sales price is going to be profit for them.

Where do I find bare land?

It could be anywhere, from out in the woods to the inner city. Bare land simply means land that hasn't been built on, yet. It's waiting for someone to purchase and develop it. That could be you. Or you could be a speculator, buying the land in the hopes of holding it for a time until it appreciates in value and then reselling. Remember, the building doesn't normally appreciate in value - rather, it depreciates over time. That's why the government allows investors to take depreciation as a tax write-off. The land, however, is what goes up (or down) in value as the market changes. When a home jumps in price from $200,000 to $500,000, it's not because the house itself went up (unless there were additions and renovations). It's because the land beneath it became more valuable.

Do I know the pros and cons of bare land investing?

The pros include:

  • Sellers will often finance the deal.
  • You don't have to worry about tenants or collecting rent.
  • Profits can be very large.

The cons include:

  • The turnover time is slow, unless there's a very hot market.
  • Sometimes lots of cash is required.
  • Bare land can be difficult to finance.

Need an answer?
Get insightful answers from community-recommended
experts
in Real Estate on Knoji.
Would you recommend this author as an expert in Real Estate?
You have 0 recommendations remaining to grant today.
Comments (0)
ARTICLE DETAILS
RELATED ARTICLES
ARTICLE KEYWORDS