Understanding Land Investment For Generating Income

Many investors by raw land and rent it to another investor who builds an improvement on the land. This is called ground leasing and this type of land investment can be very lucrative. For example you may own a piece of land at a very popular intersection. Currently this parcel is doing nothing but costing you property tax so you would like to earn some income from it but you don’t want to sell.

Drugstores, fast food chains in any number of companies will rent your land for 20 years, pay to build their buildings and in the end you will have the land and the building. Developers also utilize ground leases, while they would prefer to buy the real estate; prime land in a good location may not be available. Developers to not make any money unless they develop so they’re often forced to ground lease to stay in business.

If there are a few pieces of land in prime locations that are available for your land investment consider the following before jumping into the deal.

* Find an expert attorney. Do not rely on your real estate broker to keep you apprised of all the nuances involved.

* You only want property that is zoned for your anticipated use. Do not buy property based on anyone’s word that you will be able to rezone it once you buy. Rezoning can take months and by that time your prospective tenant has moved on. Many land investment deals have been left on the table due to zoning conflicts.

* Determine if the land is buildable. A lot that is 40 feet wide by 40 feet deep but with local laws prohibiting buildings within 25 feet of the property line is un-buildable. Also if the land is a mosh pit and unable to support structures without additional work it will be difficult to find a developer to lease to.

* Are utilities close by? If the land is in the middle of nowhere without access to storm and sanitary sewers it will be very expensive for someone to build on your property and you may not see any returns on your land investment.

When you find the perfect piece of land and a prospective tenant, always use an experienced ground lease broker to negotiate your transaction. You should also become well-versed in commercial ground leases and land investment deals. You will still need your broker and attorney but by being a more knowledgeable investor and asking the right questions you can save money by utilizing your professional’s time wisely.

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