Lucrative Land Investments
Chris Palmeri (Senior Correspondent, BusinessWeek) gives expert video advice on: What types of land investments can make me a millionaire?; What areas of the U.S. have the best land investment potential?; Is land a risky investment? and more...
What types of land investments can make me a millionaire?
There are different types of land investments that can make you a millionaire. There are lands that are just completely not permitted for homes; it's the rawest kind of land, and the advantage of that it's lower in price; it's a lot cheaper than buying a house or a building, but you have to be ready to think really long-term. That's the type of property that you can't really take out a loan on because you need income to service your loan. If you want to buy a piece of land in a resort area and just sort of hold it for long-term, that's a fine strategy. If there's a part of town that you know is turning economically and everyone seems to be buying houses and fixing them up, and you want to buy a property there, that's a strategy. But, buying raw land--because it doesn't produce income, you really need a sound plan on what you're going to do with that.
What areas of the U.S. have the best land investment potential?
Right now there's a big trend: Back into cites. If you can find an opportunity in a downtown area that's historically depressed but it really seems to be coming back. If you can find a property, a parcel land that's there. If you can finance it in a way that you can hold it for awhile. Then that's a sound investment- that's a way to multiply your money. Outside of that, you know you're out in more remote areas competing against big home builders, mall developers. These people all day long just think about that, and that's probably not where you should be putting your money, unless you really, really know the market.
Is land a risky investment?
Raw land is a very risky investment. There was a story, one of the nation's biggest home builders, a guy named D.R. Horton, said that if you tour the graveyards of defunct home building companies, the tombstones all read: too much land. They bought property, and they knew that they were going to build on it, but they got caught in the cycle of the real estate. They bought too high, now they're stuck on it. They can't build a home because they can't sell the home. And they got killed because of land.
What are the pros and cons of buying land to make millions?
The pro is that in the long run, as Mark Twain said, they don't make it anymore. So land is always going to go up in value, over your lifetime. The problem people have is that they buy more land than they can afford, they pay too high a price for it because there's this land rush going on at the time. If you can finance a fifty thousand dollar vacant lot somewhere and have a dream of maybe building your house there, or really see an opportunity where somebody else would want that property longer term, and it's not going to break your bank to do that, then that's a great idea. If your goal is to actually develop land, that is a career, that is not a side project.
Should I have a partner help me invest in land?
I think partners are always a great idea and family is probably a good place to turn. Your parents may have money, disposable income that they want to devote to something. You can all have a project that you can do together that will bring you together, hopefully it would not tear you apart. It is not a bad idea to go into business with your family. If this spreads the risk, the capital and gives you somebody you could call on all the time in anytime of the night and figure this project out.
What are the secrets to making millions buying land?
Buy low, sell high. That is the greatest secret. Really doing your research and taking a long term outlook. Not getting caught up in the latest get rich quick scheme.
Can I get rich quick by investing in land?
If you are very lucky. You know, even Donald Trump has made mistakes and that is his job investing in real estate. So, it is a source of great long term wealth. But the words long and term are the key there. Do not over extend yourself and really really get to know the market. Everyone has got a story about a piece of land that twenty years ago was worth whatever and now it is worth fifty times that. You are going to miss some opportunities. But if you are out there researching and you are financing things correctly and you are purchasing, taking a prudent risk. That is the way to make long term wealth.