Buy Cheap Land
When knowledgeable real estate dealers recommend that you should buy cheap land as an investment, they are not referring to per-parcel prices, rather they are talking about per-acre prices. A cheap per-parcel price would be a one-acre tax sale lot for “only” $2,000 – however that equates to a per-acre price of $2,000. An example of a cheap per-acre price would be an 80 acre tract for $23,920. While the per-parcel price is higher, the per-acre price is only $299. Successful rural land investors always concentrate of per-acre prices and ignore the illusion of per-parcel prices. Since the Pilgrims landed in 1620 and Americans began migrating west, astute land investors have made fortunes buying land by the acre and selling lots by the parcel!
People who buy cheap land are engaged in a special niche of the real estate business that is mostly overlooked, yet can be extremely exciting and financially rewarding. There is a vast difference in the philosophical approach of buying an apartment building in a major city or acquiring barren prairie land in the middle of nowhere. There are many complex issues, financial details and management concerns involved in buying apartments while the purchase of unimproved rural land is a relatively simple transaction. The interesting thing, however, is that cheap land in rural areas will often increase in value more rapidly than will an apartment building in the city.
If you buy cheap land there are certain inherent advantages.
- Financing can be readily available if the seller carries the purchase note.
- Property taxes are usually quit low.
- Risk of ownership is almost negligible because raw land can’t be stolen, outdated by technology, mismanaged or destroyed by fire.
- Nothing has to happen for cheap land to increase in value other than ongoing and inevitable inflation.
An example of the effect of inflation would be 10,000 acres of rural land purchased 15 years ago for $100 per acre (total price $1 million). Today the 10,000 acres would look exactly the same as it did 15 years ago; the use of the land would still be cattle grazing; zoning would be the same; there would be very little population growth in the area; no oil would have been discovered; no roads were built and no development of any kind took place – yet the same 10,000 acres might now be valued closer to $500 per acre (total value $5 million). Thus the initial price of $1 million would have increased to $5 million in 15 years, resulting basically from inflation.
If you buy cheap land you have an asset that is certain to still be here in 50 years from now, and certain to be worth more money than it is today!
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