February 28, 2014

Potential Investment Idea: Raw Land

Jon Galane
5 min

While raw land is not meant to be a quick flip, it could be a great investment for someone who has some extended time before retirement.

It’s one way to diversify a retirement portfolio. When investing in raw land, the ideal property will gain value over the years and potentially produce revenue at the same time. How can vacant land produce revenue? Mineral rights, grazing rights, or timberland are just a few examples.

On the downside, undeveloped property is generally considered to be a high risk investment. Consequently, banks are more cautious with lending money for raw land and usually require a higher down payment and charge higher interest rates.

Ideal spots for raw land investment include areas at the center of a growing city or around the perimeter of a quickly expanding metro area. Areas showing population growth are likely to attract the attention of developers.

In addition to location, timing of a raw land purchase is also important. Economies at each level go through boom and bust cycles. For example, an area may have substantial population growth and home sales will rise correspondingly. However, these boom cycles often result in a glut on the market when sales begin to taper off.

Investors who invest in raw land by buying during the bust cycles are more likely to make a profit by selling during the next boom cycle.

If you’re considering purchasing raw land as an investment, contact Mountain West IRA to get your self-directed IRA set up and ready for your next investment purchase.

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