Land Investment Strategies
Through the years, many land investment strategies have been utilized in an attempt to pick winning land deals and maximize profit potentials. Following are a few of the more popular strategies employed.
- Growth Patterns—analyze growth patterns of large and expanding cities like Phoenix, Albuquerque, San Diego, Los Angeles, Las Vegas, etc. Then acquire land in the path of the strongest direction of growth and wait. If the timing is good, this strategy can work; if not, it can fail.
- Pre-Development—A slight modification of the above. Find an existing housing development in any small city and purchase the adjoining land. Wait for developers, seeking to build more homes, to knock on your door. If the timing is good, this strategy can work; if not, it can fail.
- Entitlement Deals—Locate a suitable tract of land, apply for a zone change, put in utilities, build roads, and develop lots for residential purposes. Then sell the lots to small builders. If the timing is good, this strategy can work; if not, it can fail.
- Creating New Cities—Acquire thousands of acres and build an entirely new city, starting from scratch. In the 1950s, Nate Mendelsohn acquired 80,000 acres located in the desert 50 miles north of Los Angeles and began developing California City. Another example would be Lake Las Vegas. In the early 1990s, development began on this new city located about 30 miles outside Las Vegas. This strategy takes many years and millions of dollars to unfold. And almost invariably, the original developers don’t make any money.
- Just Buy the Cheapest Land Available—Ignore location, growth patterns, and don’t spend any money developing anything. Be governed solely by the lowest possible per-acre price you can find. Buy a large tract of extremely cheap per-acre land, and simply hang on to it for a long enough time. Unlike the other four land investment strategies outlined above, it is virtually impossible to lose money with this strategy.
In summary, of the land investment strategies outlined above, the last one is the simplest, has the fewest “moving parts,” and is the only one that relies on nothing but the passage of time!