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Benefits and risks of investing in land

Land for Sale

Raw land is one type of real estate investment that can yield big results. Here’s what one needs to know before making the decision to invest in land:

Benefits

Investing in land comes with plenty of benefits, especially if one does their research and knows where to buy.

  • Land gives plenty of options

    When investing in land, the buyer can give a fresh start to the property. There is a variety of properties that allow the construction of structures, depending on the area’s zoning laws and building codes. Some of the most common ones are single-family homes, multi-family homes, townhouses, and office spaces. One can also choose to rent, sell, or hold the property that’s set for development. Many landowners either develop or cultivate their land before deciding whether to sell or to hold on to it.

  • Land increases in value

    Land nowadays is very hard to find, especially ones located in more popular areas. Since real estate keeps on getting harder to come by, the demand for it also increases, thus jacking up the value of land as time passes. This is especially true if one manages to pick a property in a sought after or strategic location.

  • Land is less maintenance

    Land is much easier to maintain as compared to residential and commercial properties. The only thing landowners must keep in mind is to make sure that the land is fit for construction.

  • Land can earn passive income

    Investing in vacant land provides a unique opportunity to earn passive income if the owner decides to rent or lease out the property.

Risks

Investing inland also comes with its own risks.

  • Zoning issues

    Buying a piece of land doesn’t automatically mean that one can build anything they want on it. Each area or homeowners’ association (HOA) has its own set of zoning rules and regulations that dictate what can and cannot be built. Without proper research on a land’s zoning designation, the new owner might not even be allowed to develop the property in the way they envisioned.

    In California’s Sonoma County, landowners can build single-family homes, provided that these follow the residential density. This refers to the number of houses allowed per acre.

  • Lack of access to public utilities

    Water, electricity, gas, and sewage are essential when it comes to developing property. Without access to any of these utilities, the property becomes unbuildable, thus greatly decreasing its usability and value. That’s why it’s important to get as much information about the land before making the decision to purchase it.

  • Financing issues

    While the cost of land is relatively cheaper than that of an actual house or building, acquiring the financing for this property can be a challenge. Unlike home mortgages, lenders have less collateral for land since they are harder to resell. However, there are several financing options such as land loans, home equity loans, and SBA 504 loans that can help in financing the purchase of land.

For your next real estate investment, check out the land for sale in Sonoma County today! Learn more about Sonoma County real estate options by giving Brad Wilkinson a call at (707) 799-0455. Also send him an email at Brad(dotted)Wilkinson(at)cbnorcal(dotted)com.