Published on Monday, February 16, 2015 by Land Century
Diversification is key in 2015, and not having land in your portfolio is a recipe for disaster.
Construction is on the Rise
Housing permits are on the rise. In 2015 alone, there have been over 1 million building permits granted. These permits are often using raw land, like those added to an investment portfolio, as the location for their building.
As more and more permits are given out, land prices will rise.
Single family housing also rose by 7.2% to 728,000 permits. Many of these homes will be in neighborhoods, but others will be on raw land that is affordable to purchase.
Land Prices are Steadily Rising
The Wall Street Journal ran an interesting article reinforcing the profitability and rising of land prices since 2013. Stating that Mr. Nathan could barely sell his land for $45,000 in 2012, the investor was able to sell over 250 lots for an average price of $96,000 in 2013 in just 45 days.
New homeowners and builders are in dire need of land.
Investors are in the perfect situation to buy land as prices are rising for the third time in 3 years. Land values rose by 13% in 2012 and have rose each year since.
ROI Levels are High
Investors that follow the indexes know that achieving a 13% return on stocks year to year is a dream. While some mutual funds may offer such returns, fees lower this figure greatly. Investors also need to look into the longevity of stocks versus their land counterpart.
Stocks will fluctuate based on economic conditions and many businesses will close their doors. For an investor, this equates to a total profit loss.
Land is an asset that is physical and is owned. Even during an economic recession, land can be held, and the price will rise as demand grows again. The same cannot be said for stocks or other investments that are not tangible items.
Land sales are also in the heart of the country. Texas, Louisiana, Arkansas and Kansas accounted for 26% of all land sales. These hot spots are filled with affordable land parcels averaging $5,600 per acre for agricultural land.
Investors are financing land purchases for 31% of all land sales. This is also another avenue to make money from interest off of the sale of land. Land is also selling quickly with the average land on the market for 120 days. Agricultural land sells much quicker with an average sale taking just 60 days. Commercial land averaged 237 days in 2014.
Quick sales, financing interest opportunities and an abundance of land found in the heart of the country are just some of the reasons investors are pushing to add land into their portfolios.
The Right Land to Buy
Statistics also show that some land sells faster than other land. Whats hot right now? Land that is ready to be built upon. The less work needed to the land, the faster it will sell. Certain benefits include:
- Road Access: Local road access to the lot will increase value and the ability to sell the land.
- Utility Lines: Local utility line availability will further increase the lands value.
- Permits: Land that has building permits is also a hot commodity right now.
Investors have also found that agricultural land is a great opportunity. This is land that can be rented and bring an immediate income opportunity to the owner. Land that can be rented out to cattle farmers and used for grazing is just one example of the right land to buy. This allows the owner to have a potential for residual income while the property matures and land prices rise.
Land prices are on the rise, but now is the right time to buy. Purchasing properties in states with growing populations or in areas where a rise in commercial activity is seen will boost the profitability of your investment.
Of course, diversifying in land, stocks and bonds is the right choice for any smart investor.