Investing in commercial land is just one of the many ways you can invest in commercial real estate. When done right, this type of investment could be extremely profitable to the owner. Before investing in vacant land, it is important to learn the pros and cons to understand what you are getting into.
Pros of Investing
Commercial land is great for it’s low-maintenance reputation. Usually, there is little upkeep required of commercial land, compared to rental properties with things like plumbing and electricity. Additionally, vacant commercial land is typically much more affordable than developed commercial land and comes with cheaper taxes and fees. The cheaper price per acre allows for investors to purchase more vacant land than they could if it was developed. The sale price can typically be negotiated since landowners are usually eager to sell. Lastly, due to the low maintenance requirements and fewer bills, investing in commercial real estate is usually a more hands-off investment. While owners do have to pay taxes and possibly other miscellaneous bills, vacant land does not have any electricity, water, etc., which reduces the amount of work and money required to own the land.
Cons of Investing
One downside of investing in commercial land is the difficulty of financing a loan for the purchase. The financing process for vacant commercial land is a little more difficult than traditional loans. Qualifications are usually more stringent and might require a higher percentage of a down payment. Second, the zoning of land determines what you can do with it. Check on what the zoning is before you purchase the land, to make sure it complies with what you want. If needed, the re-zoning process can be lengthy and costly. Lastly, sometimes the reason land is vacant is because of the physical properties of it. Be sure to talk to all of the right people and go see the land for yourself to determine if it is topographically sound.
Tips for Commercial Land Investors
It is important to remember that this type of investment is more long-term with no immediate cash flow. It would be a good idea to try and purchase land near newly developing areas, that way you might see a larger profit in a shorter amount of time. If zoned correctly, you could even lease your vacant land to hunters, farmers or for other recreational uses, increasing your profit.
Purchasing commercial land has the potential to be very profitable when fully understood and done the right way. Talk to everyone you can, get resources from the owner and make sure you consult a professional commercial real estate agent to help you through this process.