The average adult is in pursuit of financial security; a state in which an individual or family has enough income and savings to cover their living expenses, emergency expenses, and future financial goals without incurring debt or relying on external support. A common path to financial security is investing, including land investment. Investing in land offers numerous benefits – appreciation over time, passive income, tax benefits, etc. Still, like any investment, land also has its own risks and drawbacks, and it’s essential to conduct thorough research and due diligence before making any investment decisions.
Here are some important things to consider before you invest in a piece of land.
Say an investor is considering purchasing a piece of agricultural land for $500,000 to lease it out to local farmers. Financial feasibility means the investor examining the financial factors that affect the investment, including the cost of acquiring the land, the expenses associated with developing the land (land clearing), the potential return on investment (ROI), and even potential risks and uncertainties.
Thus, conducting a thorough financial feasibility analysis is how you can make informed investment decisions and mitigate financial risks associated with investing in land.
Zoning and Permits
Failure to comply with zoning regulations and obtain the necessary permits means at least fines and legal complications otherwise; so you want to make sure that any land you invest in is zoned appropriately for the intended use, and that all necessary permits and licenses have been obtained.
Zoning refers to the local government regulations that determine how land can be used within a particular area so that before a residential property can be built on a piece of land, the land has to be zoned for residential use. Permits, on the other hand, are legal documents issued by local government authorities that allow an individual or organization to undertake a specific activity on a piece of land so that a building permit is required before a new structure can be built on a piece of land.
Environmental hazards refer to any factors in the environment that can pose a risk to human health, safety, or property. Investing in land with environmental hazards typically means liability and financial loss.
Here are some examples of what to look out for:
- Land contaminated with hazardous materials such as heavy metals, pesticides, or industrial waste
- Land in areas prone to natural disasters such as earthquakes, wildfires, and hurricanes
- Land located in areas with high levels of air pollution
- Land that is home to endangered species or habitats
It’s important to consider accessibility – how easily a piece of land can be reached by roads, highways, public transportation, or other means of transportation – as it can greatly impact the value of land.
For example, a piece of land located near a major highway or airport may be more accessible and, therefore, more valuable for commercial or industrial use. Or, a piece of land located near public transportation, such as a train or bus station may make it more attractive for residential or commercial development, as it offers convenient access for commuters and shoppers.
Investing in land is generally a good idea when you research important things like financial feasibility, permits, environmental hazards, and accessibility.