Developing raw land is frequently considered as an investment plan that should only be undertaken by "experts." Although buying undeveloped land is complicated, novice investors shouldn't always avoid it. Developing undeveloped land involves different processes, at the very least.
As an investor, there are plenty of opportunities in the real estate sector. Investing in residential, and commercial buildings is just one of the many alternatives the real estate sector provides to potential investors. Investing in raw land is one of the more underutilized financial options, and there is no longer a good reason to disregard it. But exactly what is raw land development?
Buying a plot of land to either develop and build on it or keep it for future appreciation is known as raw land development. Although there are several ways to invest in raw land, they all fundamentally offer advantages over other forms of investments.
The Raw Land Development Method
Raw land is a tremendously desirable resource for investors due to its scarcity. In addition, your land can increase in value if you buy it in a region expected to experience expansion and development. Investors wishing to develop undeveloped land should exercise due diligence and research the market they intend to participate in.
You must first look at current changes in your chosen market. Buyers will probably be searching for the property if there has recently been a spike in development projects in the neighborhood.
Now that you have a general understanding of raw land as an investment let's walk you through the development of raw land step by step.
Economic Viability
Analyzing the viability of investing in raw land is the first stage. This is crucial since it will reduce market uncertainty and offer a model for the expenses against the profits of your venture. Investors will succeed if they grasp the feasibility of your project, including the expected costs, revenues, and overall return, even though the numbers will only be estimates.
Purchasing
You may more accurately establish the offer price after you are aware of the charges you'll probably incur and what you ought to get in exchange. At this point, investors must request that contractors submit genuine bids for the project.
Zoning
The third stage of raw land investment focuses mostly on land surveying and zoning. Considering local zoning laws, this has to do with what kind of property ought to be built on the plot.
Zoning will be a key factor in how you proceed, depending on the kind of property you want to build or how you plan to market it to purchasers. Zoning regulations will dictate what kinds of buildings can be constructed on the property.
Finance
The type of financing you acquire will depend on how you intend to use the property, as with all real estate transactions. The loan-to-cost (LTC) ratio is the one factor that investors need to pay close attention to.
Construction
Construction is the next-to-last step in the development of raw land. Often, this involves grading for roads, and utilities and eventually constructing the property from the ground up. Investors should also be aware of the project's construction financing component. Generally, contractors will be paid for tasks, including project phases.
Promotion
Marketing is the last stage for the land development companies. While choosing your marketing strategy, doing your research on the area, the rental market pricing, and the demand for rentals will pay off. Next, a marketing strategy should be in place for investors to draw buyers to the property. This could entail using a realtor, internet listings, the MLS, newspaper advertisements, or social media.
Conclusion
Investing in raw land development can be a profitable venture if done correctly. Novice investors can succeed in this market by conducting due diligence, understanding market cycles, and being prepared for hard work. The six stages of land development are crucial steps investors must follow for a successful investment. With the scarcity of raw land, its potential for appreciation, and steady cash flow, raw land development is an underutilized investment opportunity that investors should consider.
Kier + Wright is a company that specializes in providing civil engineering and land surveying services for the planning and construction of some of California's most exciting land development projects. Their business is driven by a deep understanding of the importance of people, communities, and the places that bring them together. With every project, they work tirelessly to build connections and strengthen relationships. Through their work, Kier + Wright strives to keep communities moving forward, growing sustainably, steadily, and purposefully toward a better tomorrow.