Most of us assume that land increases in value only if it is situated in the path of growth, if there is some future development potential, or if the land has a profitable usage. Sophisticated buyers will employ real estate appraisers, investment analysts, and land planning professionals to help ferret out properties with the best potential. But what if someone took a contrarian approach and simply acquired the cheapest land available in the United States, regardless of location—with the only requirement being a low price?
Let’s review just one historical comparison and see.
In 1986, a developer who employed appraisers, investment analysts, and professional land planners, purchased thousands of acres just west of Phoenix, Arizona, and envisioned a master planned community of 300,000 people. An $82 million bond was floated to pay for the infra-structure, and a London-based company invested millions of dollars more in the planned development.
By 1988, the savings and loan crises had arrived, a national real estate recession was beginning, and land values tanked. In 1989, the planned development went into foreclosure, resulting in the loss of millions of dollars.
In 1986, a person could have purchased thousands of acres all over West Texas, Wyoming and South Dakota for $35 per acre or less. When the savings and loan crises hit in 1988, rural land like this wasn’t affected at all, and prices remained stable. Today, this same land in West Texas, Wyoming and South Dakota, still unimproved and without utilities or maintained roads, will sell for around $350 per acre.
Emotionally, it is very hard for people to understand that just buying and holding land will usually return the biggest profits over the years. It is human nature to want to “improve” their land and to try to find “uses” for their land. These “improvements” and “uses” often result in much larger “carrying expenses” than by doing nothing, and just waiting.
The beautiful thing about buying the cheapest land available is that it can’t go down very far in value, and historically it always rises in value through the years! It is kind of like a “can’t lose” proposition! Put another way, it is a lazy man’s way of increasing assets with very little risk.
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