Investing in Raw Land: What You Need to Know

Investing in raw land can be a great way to diversify your portfolio and generate a return on investment over time. However, there are some special considerations to keep in mind when investing in untreated land. To ensure that your investment is successful, you should consider how your land will have access to public services, how remote your property is, and property tax expenses. Plots for row crops and livestock come with additional responsibilities, so most lenders will require a down payment of 20 to 50 percent and higher interest rates for loans for uncultivated land.

Investing in land is usually only viable for people with abundant liquid assets who don't mind turning that money into illiquid for an indefinite period of time. Real estate speculation or the transfer of raw land occurs when vacant land is purchased or contracted for with the intention of investing it as an investment. Anyone can buy land; however, it takes a specific type of investor to turn vacant land into a valuable asset. For example, contractors and home builders, often referred to as development investors, are some of those who often have the skills and qualifications necessary to develop uncultivated land. Investing in land involves more than finding land and making an offer. Legal problems can turn the most attractive terrain into a bad investment for reasons beyond your control.

For example, your municipality could strictly control how you can use the land in question, ruining plans to build potential buildings or farms. In addition, your neighbors may be able to legally access part of the property because of land easements. Not only can these methods increase your investment criteria, but they also provide you with the knowledge and experience necessary to adopt a new investment direction. We can work with you to determine the type and size of rural property that would be best for you in terms of initial investment and potential return on investment. You can invest in land through residential and commercial properties, farmland, and specialized agricultural investments.

They should also be aware of the specific types of land-related investment options available through investment products, such as Exchange-Traded Funds (ETFs) and Exchange-Traded Bonds (ETNs). In addition, as with investing in a company's stock, your investments are usually as small or large as you want. From the standpoint of pure investment, uncultivated land has a very unattractive return on investment, especially considering the time that investors usually own land to generate a return on investment. Investors must always be on the lookout for new investment opportunities and ways to expand their investment portfolios. However, for many investors, an Exchange-Traded Fund (ETF) or Exchange-Traded Note (ETN) is a great way to have a broadly diversified real estate investment portfolio.

While most small investors are unlikely to be able to own a traditional row crop or livestock farm, many agricultural investment options offer traditional agricultural companies acceptable investment risk. Therefore, by investing in this product, small investors will have extensive exposure to investing in traditional agricultural operations. By using these types of investment products, investors should be able to satisfy their desire to engage in land-related recreational activities while at the same time generating a reasonable return on investment over time. For example, the Total Return ETN (JJA) of the Bloomberg Agricultural Subindex of iPath provides investment exposure to soft commodities such as corn, wheat, soybeans, sugar, cotton and coffee; and the ETN (COW) of the Bloomberg Livestock livestock sub-index of the iPath series B provides investment exposure to cattle and pigs. Investing in real estate for farmland, forest or hunting grounds is becoming a much easier prospect for investors who want to diversify their investment portfolios. Investing in land may not be right for you if you don't want to research your investments further or take on more risks.

Harvey Billa
Harvey Billa

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