- The Washington Times - Thursday, September 16, 2004

I was fortunate enough to participate in a conference of top producers in Baltimore. During one of the sessions on real estate investing, the topic of investing in land surfaced. This form of investing is overlooked by a lot of people, but it should be given a second look by those considering real estate investing.

Traditional real estate investing means purchasing a house or apartment, preparing it for rental (read: paint, carpet, deep cleaning, systems management, etc.), finding renters and then waiting for the rental checks to roll in — as well as the fix-it calls.

Some of the other regular challenges of real estate investing are the periodic calls from disgruntled tenants, from the tenants’ neighbors or the property managers complaining about your disgruntled tenants, and — the worst-case scenario — from law enforcement officials who were contacted by neighbors complaining about your disgruntled tenants.

Investing in nontraditional real estate takes a bit of out-of-the-box thinking. Land is one of those types of investments.

Purchasing land is not a lot different from purchasing any other property. If you’re buying with a mortgage, the bank or broker is still going to be concerned about the value of the property and may want to inspect the lot or acreage for its value.

If you want to purchase property to build a dwelling that does not have public sewerage, the local jurisdiction will be interested to know if the land will percolate — or perc — so an on-site septic system can accommodate the number of bedrooms you want to put in the house.

If you have visions of subdividing a larger portion of land and selling it off lot by lot, you’ll have to have the proper inspections — perc tests — done per lot. You’ll need to check with zoning authorities to determine what kind dwellings will be allowed or how many acres per house are required. It might limit your grand vision if you find out you can only put two houses on the 10-acre lot you had intended to load up with a bunch of town houses.

Coastal, mountain and waterway lots can be keen investments. One investor I know purchased a lot near a bay and ocean area. In four years, the property has nearly doubled in value, and nothing has been built on it yet. Better still, it was purchased with just a 10 percent down payment, so the actual return on investment is nearly 800 percent.

There are more things to do with land than just building a house. Wooded land can be harvested for timber. In fact, before purchasing timberland, an investor can hire a timber estimator or appraiser to see how much the timber is worth. The potential revenue from the timber harvest could be used in the equation for applying for a mortgage to purchase the property.

Timber also can be replanted and harvested again. This type of property can be passed on from generation to generation to supply your heirs with a renewable resource and continual cash flow.

Other resources are available on land as well — natural gas, oil, coal, minerals — all buried deep in the earth. With luck and wise investment, the owner can pay for the purchase of the land from the revenue generated by these products.

An investor could sell the land but retain the mineral rights to the property. In such a scenario, someone may farm or build on the land, but the mineral-rights owner can still pull revenues from the resources.

To get started, talk with a Realtor in your target area. Get to know what land is selling for per acre in the locality and what resources are available on the property.

Research, research, research and then research some more.

M. Anthony Carr has written about real estate for more than 15 years. Contact him by e-mail ([email protected]).

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