Published on Saturday, October 14, 2017 by Land Century
You've wanted to invest in land for years, and people keep telling you that government land is cheaper to purchase. It's something that you may have spent a lot of time researching, but you cannot find an answer as to whether or not government land is actually cheaper.
In our opinion, government land is not cheaper, and we're going to tell you why.
First and foremost, there is no free or cheap land that is provided by the government. Yes, there is land that is available in certain cities that the local government is selling or giving away at rock-bottom prices. But we're talking about on the federal level not on the local level. The U.S. is simply too vast of a country to determine if it would be cheaper to buy land locally from the government. And it's often hard to find this land available.
The Homestead Act of 1862 has been abolished.
Under the Federal Land Policy and Management Act, which was introduced in 1976, the government has taken over ownership of public lands, and the Homestead Act is no longer present. The Bureau of Land Management is in charge of over 264 million acres of land that was once public.
But this land may be sold under certain conditions in accordance with the Bureau. You'll find land in the following areas:
- Desert land
The government is rather smart when they sell land, and it's very difficult to find this land for sale in the first place. You'll need to look on both the local and federal levels in your area, and many land investors find that they need to relocate to actually use the land. If you're looking for grassland for farming, you may have to relocate across the country, which has its own inherent cost associated with it.
However, we have not actually presented the reason why land is not cheaper when you buy from the government. Under the law, the government needs to sell land at a fair market value. What does this mean? The government will look at the market value of the land in your respective area, and it will be in relation to the price that the market is currently set at.
If the average piece of land in Nevada is selling for $4,000 an acre, the government will sell government land at or around this price range.
This is done for a variety of reasons:
- The government has the responsibility of ensuring that any piece of public property is sold at a fair value that is fair to the taxpayers of the country. Wouldn't you be mad if the government sold every piece of land for rock-bottom prices, effectively wasting your tax money in the process?
- The government does not want to lower the value of the current market. If the government was to sell off all of the land under its control, roughly 1/8th of all land in the country, it would cause prices of land to plummet. This occurs because there would be so much land on the market that other sellers would have to reduce their prices accordingly.
It would not be fiscally appropriate to sell land for extremely cheap prices by the government. There also other factors that may be taken into consideration when buying land.
Factors That Increase the Price of the Land
In the event that you find government land is cheaper, there are a few considerations that should also keep in mind at this time. Let's take a look at an example:
- The government is selling a piece of land for $1,000. The lot would normally sell for $1,500.
In this case, you're saving 33% on the cost of the land. This is an exceptional bargain, and one that I would look into with an open mind. What you need to consider is that government land may or may not be cleared, it likely will not have road access or hookups available, and you will need to do a lot of digging to find this property.
You may even hire someone to find a property of this type available.
All of these will have their own intrinsic value. If, for example, you wanted to purchase the property and the price is simply too good to pass up, you also need to consider:
- Where the property is located?
- What are the costs of managing the property?
- What is the demand for land in the area?
- What is the farming industry or timber industry in the area like?
- What are the taxes in the area?
- What will it cost you to relocate to this area if that is your purpose for the land?
- How much will it cost to build a home in this area?
You need to consider all of these factors, and then compare your prices locally. It's easy to say that the piece of property is being sold at a much lower price, but then you also need to consider what needs to be done to either get to the property or find the property. If you're paying someone $500 to find you a piece of property, the price has been completely negated as a result of the $500 expenditure to find the property.
You also want to visit the property, and if it's across the country, this will also add to the cost of the actual purchase.
There are times when local governments will have exceptional deals. If you're brave and you want to go and live in Flint Michigan, you'll find the land prices are exceptionally low. But the crime rate is extremely high, and businesses have been leaving the area in droves.
The government also sells land in areas where the local economy is not doing well.
Kansas recently had a town that was giving away land if the person promised to build a residential property on the parcel. This is great, but the local economy is virtually non-existent, and you must abide by the restrictions of the land, which were to live on the property for two years.
In most circumstances, it is more reliable and cheaper to buy land at wholesale prices rather than going to the government to buy land.