Author, Serial Entrepreneur, Real Estate Investor, Stock Trader & Co-Founder of The Ligon group.
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When most people think of real estate investing, they envision a dilapidated home that needs immediate refurbishment. Home remodeling, also known as fix-n-flips, has been popularized by numerous home flip reality television shows. However, house flipping is just one of many forms of real estate investing. Another profitable way of investing is in the country itself.
Land speculation or turning over raw land is when you buy or contract to buy vacant land with the intention of converting it as an investment. Anyone can buy land; however, it takes a specific type of investor to turn raw empty 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 needed to develop raw land.
If you’re not a development investor, here are a few ways you can still invest in raw land.
Flip package
Parcel flipping is a method where an investor enters into a contract to buy an undivided parcel or piece of land and passes it on to another investor. This means that an investor has no intention of buying and closing the land. It is the intention of the investor to transfer its contractual interest in the land to another investor for purchase and development.
This method can be performed in two ways.
Method one: search and mirror as is
The find and flip method as it is is exactly what it sounds like and quite simple. The investor’s goal is to negotiate a reduced purchase price with the owner of the plot or piece of land and to turn the agreement around to another investor. In addition, the investor receives a “finder’s fee” in the form of an order for the transaction.
Method two: search, formulate and mirror
The find, formulate and flip method is more complex and requires additional hands-on work. With this method, the investor aims to formulate a more favorable deal with a higher profit margin. This can be done by doing some of the legwork necessary for the development of the country. For example, ordering land surveys, confirming and identifying the zoning requirements necessary for building or even combining two or more lots into a plot of land for resale.
Parcel flipping can be performed by investors at any level; however, a little investing experience can help with the process. Plots and plots of land are different from residential lots and normally take a little longer to turn over, but can generate bigger profits because they are not as readily available in desirable areas.
For either method, when looking for lots of new construction areas, keep an eye out for where shopping centers and neighborhoods are being developed. Packages and tracts around new developments can be a great place to start your evaluations when trying to turn over country.
Turn residential lot
Flipping housing is a method in which an investor buys or contracts to buy the land on an empty plot and resells the land to another investor, usually a development investor. Residential lots are different from parcels or pieces of land because they are normally in subdivisions and are already earmarked for development.
This method can be performed in two ways.
Method one: purchase and resale
The purchase and resale method is used when the investor has the capital to purchase the land from the landowner. This means that the investor closes and finances the initial purchase of the land and later resells the land to another investor.
Method two: purchase and resale contract
The contract-to-purchase method only requires the investor to have a contractual interest in the land. They don’t have to own it. This means that the investor has negotiated a purchase agreement with the seller (land owner), whereby the investor has the right to buy the land. The investor would then sell that “purchase right” to another investor and collect a fee, normally in the form of a contact order.
Flipping residential lots can be a quick and easy way to invest in rough land for any investor, as long as you know what to look for. Always make sure the lot is buildable. Just because it’s in a subdivision doesn’t necessarily mean you can build a home on the property.
Some vacant lots are empty for a reason. The lot may have been subdivided and no longer meets property standards for development, or there may be an easement on the property preventing it from being developed. A simple phone call to your local zoning department should clear up any confusion; you can also order a survey prior to purchase.
Conclusion
Investors should always be looking for new investment opportunities and ways to expand their investment portfolios. Turning raw and fallow land can be a profitable addition to any investment strategy. These methods can not only contribute to your investment criteria, but also provide you with the knowledge and experience for a new direction of investing. Remember that success is not a destination; it’s a journey.
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