Investing in land has historically been one of the largest wealth-building tools in American history. Not only is real estate in general a powerful diversification tool, but land investment comes with the potential for passive income production, tax benefits, and stability in times of market changes. Here we will be breaking down just a few of the reasons why land investment can be a powerful wealth-building tool in the year 2022.
One of the primary reasons land has sustained itself as such a powerful asset is its wide variety of potential uses, especially those that produce passive income. There is a widespread common misconception among investors that buying raw land is nothing more than a long-term play, only profiting from the increase in value over long periods of time until sale. The reality is there are about as many opportunities for steady passive income uses as are allowed by a given location and governing ordinances.
Here are three unique ways we’ve seen buyers utilize their raw land for passive income all across the U.S:
Using land to forest timber can be an extremely lucrative real estate investment. Profits can vary widely depending on the type of tree and given lumber rates at harvest, but with relatively little maintenance required, timber farms can produce upwards of $1,000 an acre.
Renting To Ranchers
Leasing land to ranch operations is a common way many landowners convert their property to a passive income stream. This can be a great way to increase income without significantly impacting property taxes or increasing risk. Ranchers often may only need as little as 30 acres as well.
Owning land near growing areas can create a perfect opportunity to seek out a land lease with telecommunications companies. Cell tower land leases on average bring in $45,000 annually. These agreements are usually longer in terms but are a consistent and reliable source of passive income.
Another key element of land investing is the various tax implications it creates. Savvy landowners with proper guidance from accounting professionals can discover a huge amount of tax benefits. As an investor, expenses associated with the property such as property taxes and interest are deductible as personal itemized deductions.
Beyond ordinary deductions, land can be the perfect vehicle for estate planning. Tools such as Conservation Easements make it that large tracts of land can be converted into up to 100% income tax deductions, with guaranteed stewardship for future family generations.
It is important to note that tax codes change frequently, and for specific advice please consult with your tax accountant.
Over the course of American history, it’s been shown consistently that buying vacant land is a good investment. Especially when viewing various investments for their sustainability through market changes, land has managed to sustain the largest growth potential with low relative associated risk. Below is a chart from the Suncorp Valuations demonstrating just how profitable and consistent farmland values per acre have been since 2002.
Purchasing Land For Sale
Any investor looking to purchase land for sale in North America can do so with the confidence that values will continue to climb and stay sustainable in 2022. If you’re looking to start the process, getting started is as simple as browsing our huge inventory of land listings all across the United States. Otherwise, feel free to contact us to get in contact with a local licensed brokerage that can help you find the perfect piece of land for your portfolio.