The traditional real estate investment approach is to buy income properties (single family homes, duplexes, apartments, and commercial buildings), or predevelopment land near population centers that are in the path of growth. In many instances, however, simply buying unimproved country acreage in the “boondocks” can provide safer and more predictable financial results.
The least expensive part of an investment can often be the initial funds needed to acquire the asset. The most expensive part of an investment, however, can sometimes be the capital required to develop or improve the asset after it is acquired. In the case of income properties or land for development, the cost of maintaining the buildings or paying for the development can be very high. Raw land, however, costs very little to own or maintain.
For instance, let’s say you buy commercially zoned land in the city for $500,000, then spend another $1 million erecting a duplex and another $250,000 maintaining it through the years, and eventually sell the property for $2 million—then you would receive $2 million on a $1.75 million investment, or a net of $250,000.
Wouldn’t it make more sense to buy cheap acreage in the “boondocks” for $500,000, spend practically nothing on maintenance or development through the years, and resell it for $1 million at some point in the future? Using this scenario, your potential profit would be $500,000 on a $500,000 investment—instead of $250,000 on an investment of $1.75 million.
While it is a little understood real estate investment niche, sometimes just buying cheap country acreage and holding it for the long haul can be the best investment approach. In this manner you are simply relying on time to create a profit, instead of costly maintenance and improvement expenses.