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Real Estate Investment Software Blog

Vacant land is a real estate investment for the speculator because vacant land does not produce income. In fact, land investment costs the investor money each year in real estate taxes and mortgage payments.

This explains why vacant land investment is frequently referred to as an alligator; it just eats. Since land does not depreciate, it doesn’t even offer tax write-offs other than the actual outlay of taxes and mortgage interest payments being paid by the owner.

So why invest in vacant land? Obviously, the real estate investor is not looking for an immediate return on his invested capital; in turn using excess investment funds, where cash flow is not important. The real estate investor’s goal is to buy a parcel of land that will greatly appreciate during the holding period, sometimes even doubling or tripling in value in a few years (depending on the location of the land investment).

Okay, since it’s not the natural order of things for a vacant land investment to generate cash flow, it’s important for the real estate investor to explore ways to offset some the expenses associated with land investment. When the land can be farmed or used to graze cattle, for example, the investor might be able to lease the land to a user.

Vacant land investment is a different type of real estate investment geared for speculators. Whereas vacant land investment is completely management free and the profit potential generally far greater than in the ownership of improved, income producing property, the risk is also greater.