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As an Iowa real estate broker, I get calls like it at least once a week.
“Do you think now is a good time to buy land“. Or, “why should I invest in land instead of the stock market“.
I also get statements.
“I sure wish I’d have invested in land 10 years ago when it was so cheap, I’d be retired today!”
Or, like this one. “If I just would have bought that farm a few years back when it was for sale — look at what it is worth now!“
Hind sight is always 20/20. What will we be saying 10 years from now when we all glance back to the present day? The same sorts of things?
You might be thinking that land prices have esculated so much over the past decade or so that it’s too expensive to buy now.
It’s true — land prices have gone up, in general, over the past decade. But that is a good thing not a bad thing, as a land buyer. After all, if land prices trended downward each year than it wouldn’t be such a great investment. The fact the land prices generally trend upward over time is a reason to buy land not to back awary from land.
In Iowa, the last few years, land prices have actually slipped from what they were just a few years back — because commodities like soybeans and corn have dropped in value. So make no mistake about it: investing in land is like investing in anything else, there is performance risk, it might not go up. There are no guarantees in land investing.
But if you believe in using history as a guide to the future, then you should believe that a land investment could be a good one.
Land prices rise and fall, for sure.
There is a finite supply of land. As the world populatinon continues to climb, competetion for this resource will go up. That means price will go up. Maybe not now, or tomorrow, or next month, but they will go up — and they will go down!
Make no mistake about it — investing in land, like any other investment, is often a roller-coaster ride. But if your in it for the long haul — as you should normally be with land — then things look good for the future.
Here are 10 reason why, I believe, land is a great investment:
1). They just aren’t making any more of it!
As we stated above, land is a finite resource. Based on the law of supply and demand, it just makes sense that as the number of people increases so too does the demand for available resources.
And, since they aren’t making any more land these days, prices should increase, over time.
Makes sense, right?
2). Land Doesn’t Break!
Lots of investors get into rental properties and housing, in general, to create wealth.
Housing is a great wealth builder. And so is land.
The nice part about land compared to housing, though, is that it doesn’t break. It’s a simple characteristic of land that makes it so appealing — land just sits there asking for no favors and requires little to no maintainance.
Nothing really happens to it.
That’s my kind of property!
3). Land is a “Hands Off” investment.
Since land doesn’t break, and for the most part, there is nothing to do. It just sits there. Quietly. Asking you for nothing.
That’s a great thing: land is not constantly falling apart, like housing does.
Land is sort of boring this way.
But boring is good. Because it frees up your time to do other things you would rather be doing like fishing.
Of course, there are things you may need to do with some types of land — such as putting up border fencing. But, in general, land is much more of a hands off or “laissez faire” investment than comparable options in the world of real estate such as housing.
4) Land values don’t normally swing wildly.
Ever own some shares of stock and find out a short time later that they dipped in value — I mean really dipped in value!
This is pretty common. Shares of individual company stock swing up and down, short term, like a paper airplane in the breeze. Land doesn’t do that on a normal basis.
On a normal, day-to-day basis, the value of any individual land parcel general stays pretty constant. (of course, things could happen to change the value of any individual piece of land quickly — like a notice of a new airport being discussed in the local paper, a notice for a new mall on the edge of town, or a hog confinement coming to the land near you.
Things happen and prices of anything can go up or down fast. But, in the grand scheme of investments, land prices generally stay pretty constant, compared to many others. And, in Iowa at least, land tends to progress upward over time. (Note: chart/diagram above)
5). Land is easy to finance – and you get the “power” of using other people’s money.
There is no doubt about it. Using other people’s money, albiet, from a friend, relative, bank or otherwise, carries risk and can create stress. You want to be careful any time you borrow money and be sure of your finances before you do. You want to be able to pay it back each month without undo stressing yourself or your loved ones.
But, as long as you are careful, financing real estate with other people’s money can be a real boon to your pocket book.
Assuming the land you purchase carries some sort of monthly return back to you — this could be income from crop ground rental, a hunting lease, government subsidy payment such as CRP, a timber sale, etc., — you come out ahead of other investment vehicles that don’t pay cash back to you each month.
And, any return you get back from any land income sources can be used to pay for the monthly/yearly interest on the loan and you may even make a return over and above that amount that allows you to pay down the principle too.
Using the power of borrowed money “leverages” returns in your favor over time, assuming a gradual increase in the value of the land. This enables you to buy more with less money out of your own pocket.
This allows you to use any excess cash toward other things like more land purchases, home maintaincence, family things, or a fishing trip. This is something that is often forgotten but shouldn’t be. By not having to pay “all cash” to buy land you get to keep more cash in your pocket for necessities, goodies, or other investments.
6). Tax Advantages
While land itself cannot be depreciated over time to help reduce your tax burden, improvements to the land can (such as fencing, driveways, tree shelters, and buildings). You’ll need to discuss this in detail with your tax manager or accountant. But land does have some potential advantages here over other investments (such as common stock).
Also, Iowa has the Forest Reserve Program. This enable owners of forestland to take the land off the tax roll! That’s correct: you pay zero real estate taxes!
7). Enjoyment of Use
With land, you can use it. You can enjoy it. It’s sitting there, quietly, waiting for you and your family to get some use out of it.
What can you do? You can hunt, fish, hike, bike, walk, run, ski, camp, build, etc. You can do wildlife photography.
You can just go “reflect”. The point is that you can enjoy it however you desire. It’s hard to enjoy using a stock certificate!
8). Government Programs
Land has all sorts of options in regard to programs that help you to not only pay for the land but to make it better.
Did you hear that right? The government will help you pay for your land through these programs and to make it better!
In Iowa, the Resource Enhancement and Protection Program (REAP) provides funding to help landowners make various improvements to wildlife and wildlife habitat on their land.
The Conservation Reserve Program (CRP) is another program that provides millions of dollars to landowners across the nation to protect sensitive tillable acres from massive erosion and to enhance the wildlife habitat in these areas.
There are LOADS of other programs available to landowner as well. Such programs can make the land more valuable to the landowner. These programs also enhance the wildlife habitat as well as create, protect, and promote vital wildlife ecosystems. These programs help the whole nation by enhancing soil and water quality for everyone to benefit from.
9). Land Can Create Multiple Streams of Income For You.
In the form of cash rent from farming, hunting leases, government program payments (CRP, REAP, EQUIP, etc.,).
These cash streams are like housing tenants that provide income to you each month. The only differnce is these “tenants” don’t break down your property!
Ring up another victory for land investing!
Wind turbines, cell towers, oil drilling, etc., are some other potential ways your land could literally be handing you cash on a regular basis.
Of course, the income any particular piece of land has the ability to produce depends on lots of factors. Every land parcel and location is different. You’ll just have to analyze the potential of each parcel of land you find.
10). Land Creates Wealth
There is no doubt about it.
By buying land at the right price, with good financing, and by creating cash flow with all the cash flow creation opportunities that we’ve already discussed (crop rental, various leases, gov. programs), it’s not hard to create solid long-term wealth through land investing.
I am not here to tell you that any land deal is a great land deal because it isn’t. You have to shop. You have to buy right.
You have to get to know the in’s and out, as you do when investing in anything. But I am hear to tell you, it’s not that hard and that you CAN do it. People have been investing, and profiting, and building wealth with land for ions…it’s nothing new.
But, still, so many people don’t do it. It’s amazing. So many people have just their family residence as their biggest investment. You can do better. You can gain more wealth. Wise land investing could be just what you have been looking for!