Cheap land refers to the per-acre price as opposed to the per-parcel price. For example a 160 acre tract for $31,840 is much cheaper than a one-acre lot for $4,000. Why? Because the 160 acre tract is priced at $199 per-acre and the one-acre lot is priced at $4,000 per acre.
Cheap land is a special niche in the real estate business that is mostly overlooked, yet can be extremely exciting and rewarding. There is a vast difference in the philosophical approach of acquiring a commercial building in the middle of a major city for $10 million or buying 50,000 acres of cheap land in the middle of nowhere for $10 million. There are many complex issues, financial details and management concerns involved in acquiring the commercial building while the purchase of 50,000 acres of barren prairie land is a relatively simple transaction. The amazing thing, however, is that the chances of the 50,000 acres doubling in per-acre value could be better than the chances of the office building doubling in per-square-footage value.
There are multiple advantages to buying and owning cheap land. First, financing can be readily available if the seller carries the purchase note. Second, property taxes are usually quit low. Third, the risk of ownership is negligible because raw land can’t be stolen, outdated by technology, mismanaged or destroyed by fire. Fourth, nothing has to happen for the land to increase in value other than inevitable inflation – no population growth is needed, no rezoning required, no development has to take place, no oil or gas has to be discovered, and no improvements need to be made!
An example of the effect of inflation would be 1,000 acres of grazing land located in the “middle of nowhere” purchased 20 years ago for $50 per-acre (total price $50,000). Today the 1,000 acres would look exactly the same as it did 20 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 1,000 acres might now be priced at closer to $500 per-acre (total value $500,000). Thus the initial price of $50,000 would have grown to $500,000 in 20 years without the owner having had to do anything!
Many Americans own stocks, a home, life insurance policies and perhaps an annuity of one form or another. But in addition every American should also own a large tract of cheap land. Why? Because of all the other assets mentioned, the tract of cheap land is the only asset that is guaranteed beyond any doubt to still be here 50 years from now and to be worth more money that it is today! In fact, history has proven that it’s virtually impossible to lose money owning cheap land if it is purchased cheaply enough and held long enough!
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