How to Strategically Invest in Land Real Estate

Every land purchase—whether you’re looking for your first homestead or in the market for a new farm—is momentous. And you want an investment of this size to bring future prosperity, fulfillment, and dividends.

Securing long-term gains through undeveloped property investments comes down to strategy. Real estate transactions (especially land purchases) require both buyers and sellers to channel their financial savvy to secure the best possible outcome.

So, what does a strategy-forward real estate approach look like in today’s challenging market? In this guide, we’ll break down top insights from our team of land pros.

Maximizing Returns Through Strategic Land Investment

While there are countless approaches to land investment, here are a few make-or-break strategies for both first-time and long-time land buyers:

Finding the best opportunities – Simply put, not every parcel will be a perfect match. Between varying trends across geographic markets, location-specific factors, and growth potential, you need to figure out what you’re looking for to find your unicorn property.

Curating your risk profile – If money is no object, you probably have more flexibility than a buyer on a tight budget. But no matter your financial background, you need to understand the factors that inform risk in land transactions: regulatory limitations, potential liabilities, and your own due diligence.

Leveraging expertise – Unless you’re a real estate professional yourself, even the most straightforward land transactions can be difficult to navigate. Professionals will tap into their networks to help you find your ideal property, negotiate in your best interest, and suss out value-added opportunities throughout the purchase process. If you need to find a land pro in your area or haven’t begun looking, use our directory to get started.

Let’s dive into these three overarching strategies in more detail.

Identifying Lucrative Land Opportunities

Before making an offer or heading to the negotiation table, you first have to find your ideal property that offers the financial returns you’re looking for. There are three strategies that can help you identify the most lucrative land opportunities:

Analyzing Market Trends and Demand

In today’s real estate market, there are two truths to confront before you start your land search:

Tides change fast – Last quarter’s market data (e.g., local sales prices, national interest rates, inventory) may not reflect today’s market realities.¹ When assessing trends in your ideal market, try to find the most up-to-date data available.

The impact of supply and demand on price – Even in a market where inventory and buyer motivation can change on a dime (or every time the Fed changes interest rates²), keep your finger on the pulse of supply and demand. If your ideal market is short on properties and buyers are snapping up every parcel at record speeds, you might need to stay patient and wait for prices to fall.

With the above in mind, your market analyses should account for:

Local inventory – The sheer number of properties on the market
Sale prices – Recent sale prices from comparative properties
Changes over time – Long- and short-term price and demand fluctuations
Common buyers – The typical shopper in your market
Lender temperature – The willingness of local lenders to finance land sales
Local trends – Housing shortages, building code changes, and other local circumstances

Ultimately, your market analysis should answer the question: “Is it a good time to buy property in this area?”

Assessing Location and Accessibility Factors

In short, the specific location of a property (and the ease of accessing it) can play a significant role in your up-front costs:

Access is critical – Is the main road into a property subject to washouts? Do you need a four-wheel-drive vehicle to reach the gate? If you can’t reliably access a property, you’ll need to fix this after signing on the dotted line—and such efforts usually aren’t free.

Utilities matter – Whether you’re planning to build a home on your parcel or start a farm, you need the inside scoop on utility access: Is there a well on the property? Is it possible to bring power to the parcel? Who are the Internet Service Providers in the area? If you’re looking to plant ag fields and there isn’t currently a water hookup on the property, you’ll need capital to overcome that challenge.

Region resources reign supreme. Are there local organizations supporting farmers or homesteaders in your ideal market? How far is it to the nearest grocery store? These questions will inform your everyday life and your bottom line.

Exploring Potential for Development and Growth

As you shortlist potential properties, remember to play the long game. For example, how your plot (and the parcels around it) could change in the coming years. Depending on your goals for the property, you’re likely either:

Seeking land with growth potential—If you hope that parcels around yours are eventually developed into an active residential or agricultural community, your search should reflect that. Consider properties with proximity to up-and-coming towns and cities, perhaps.

Seeking solitude – “Growth” means something different for everyone. If you’re searching for land to escape the hustle and bustle of city life, build a home without a direct view of your neighbors, or raise a family in the great outdoors, you might hope that the parcels around you remain undeveloped. If this is the case, limit your land search to more remote areas.

Managing Risks in Land Investment

Risk management is critical for any investor, whether buying real estate or building a stock portfolio. While direct financial risks (like liquidity, interest rates, and inflation³) are somewhat straightforward, let’s touch on some less widely discussed risk considerations for land buyers.

Understanding Regulatory and Zoning Constraints

Well before closing day, you should do your best to ensure that your goals for a property align with its regulatory status. This helps limit the risk of not being allowed to start your planned projects on your parcel when it’s time to do so.

During your search, consider⁴:

Current regulations – If you’re starting a cattle farm, make sure each tract on your shortlist is currently zoned for livestock and that region-specific land restrictions won’t limit your headcount, water use, and other factors.

Prospective changes – Be aware of any upcoming regulatory or zoning changes being discussed in your jurisdiction to protect your assets in the future.

Red tape – How long will it take to get approval for projects you want to start on your land?

Evaluating Environmental Factors and Potential Liabilities

Depending on your chosen region, your property could be subject to environmental risks—from natural disasters to severe weather. A few examples include:

Sinkholes
Landslides
Tornadoes
Hurricanes
Flooding
Blizzards
Earthquakes

While no landowner has a crystal ball, buyers can assess past environmental conditions on their ideal parcel to gauge prospective liabilities. Buyers can also take additional due diligence measures before closing day, such as ordering a geological survey of a property in a sinkhole-prone region.

Mitigating Financial Risks through Due Diligence

Speaking of due diligence, let’s touch on a few additional steps that can help you protect yourself before the closing day:

Assess insurability – If you’ll need insurance for a property to secure financing, ensure the property is insurable and premiums align with your budget.

Age your utility assets – Will your cast iron pipes need to be replaced in the next ten years? Does the property have an aging (and potentially hazardous) electrical system? Get a feel for your utility life cycles to predict when you’ll need major upgrades.

Consider property tax implications – Is there talk (even informally) of property tax hikes in your region? If you’re on a tight budget, consider how a surprise property tax bill could impact your cash flow.

Optimizing Returns with Professional Guidance

One of the best ways to identify optimal opportunities and protect yourself from risk is to hire a professional to help you navigate the land-buying process. When it’s time to find a land pro in your area, consider how their skills can help you optimize your returns.

Leveraging Real Estate Agent Expertise and Networks

Real estate agents bring two key assets to the table:

Their expertise – Even if you’ve purchased land before, your real estate agent has represented both buyers and sellers on numerous transactions—they have tangible experience that you can use to your benefit. In short, your agent is an expert with an obligation to protect your best interests.

Their networks – The real estate business is all about connections. Your agent can leverage their professional relationships to seek out the best possible loan terms, insurance policies, inspectors, tradespeople, and more.

For instance, when you’re impatiently waiting for closing day, and an inspection item threatens to throw a wrench in your timeline, an agent helps you overcome this challenge efficiently and affordably.

Negotiating Favorable Purchase Terms and Agreements

Because they’re experienced and have extensive connections, real estate agents are adept negotiators—perhaps their greatest professional asset.

Since they’ve represented both buyers and sellers before, they know the kinds of terms both parties are looking for on closing day:

Buyers want to limit risks, decrease costs as much as possible, and find properties that meet their needs.

Sellers want to maximize gains, keep costs associated with the sale low, and find compatible stewards who will continue their property’s legacy. (And, if you’re looking to sell, reach out to us to become a Signature Seller.)

Real estate agents intimately understand the needs and motivations of both parties in a real estate transaction, and this bolsters their ability to negotiate optimal contracts.

Implementing Value-Add Strategies

Since real estate agents have been a part of so many transactions, they know how to add value to your investment. What might that look like for land buyers?

Passive income opportunities – Leasing a portion of your property for ag, multifamily development, or even event hosting can boost your cash flow and cover some of your purchase price.

Tangible item purchases – If you’re looking to start a farm and your ideal property already operates as one, your agent could help you purchase any equipment currently on the parcel—helping decrease overall startup costs.

Conservation connections – Dedicating some or all of your land to a conservation initiative isn’t just a way to (potentially) decrease your tax liability—it’s a financially advantageous way to support environmental protection.

Between their connections and experience, agents can help you creatively add value to your transaction—either during the sale or over time.

Land.com: Your Connection to Land Acquisition Expertise

For prospective first-time buyers and long-time landowners alike, purchasing property is an opportunity to discover wide-open spaces and (with the right strategy) plant the seeds for long-term financial success.

And when you’re looking for resources to do just that, turn to Land.com—your connection to exceptional nationwide listings, real estate agents with land experience, and up-to-date information and tips from fellow landowners.

Land.com is making it easier than ever before to find your perfect piece of the world. Find a land pro in your area to start your search for your dream parcel.

Sources:

Forbes. How to Navigate the Real Estate Market in an Ever-Changing Climate. https://www.forbes.com/sites/forbesbusinesscouncil/2024/04/01/how-to-navigate-the-real-estate-market-in-an-ever-changing-climate/?sh=4e0b662c3be7
Bankrate. Fed’s interest rate history: The federal funds rate from 1981 to the present. https://www.bankrate.com/banking/federal-reserve/history-of-federal-funds-rate/
US Securities and Exchange Commission. What Is Risk?. https://www.investor.gov/introduction-investing/investing-basics/what-risk
Corporate FInance Institute. Environmental Liability. https://corporatefinanceinstitute.com/resources/esg/environmental-liability/