Anyone looking at investing in a Land Bank (i.e. blocks of vacant land)?

[MrCheapo]

[Edit. I should have mentioned. These are blocks of land in developed areas with water/electricity/gas at the boundary. For example a subdivision was created blocks sold, some blocks developed but then the fires came and people froze their development plans.]

Where I live in CA there are lots of empty blocks of land selling for a fraction of what they were going for 20 years ago. That's because they are nearby areas which have been hit by wild fires and people and insurance companies have fled. It's a classic emotionally driven sentiment that creates tremendous buying opportunities. These are still pristine areas within a few hours of major metropolitan areas but the cost of fire insurance is $5K+ for $300K homes and home insurance is the same. And it's still California so desirable at many levels.

To diversify outside of just stocks I was thinking of buying several adjacent blocks for about $100K and just sit on it for a decade if needed and reevaluating the situation by selling or building a get-away home.

I figure my annual costs would be just 3% as follows:

$1K property tax (1% of purchase price)
$2K to remove the fire risks required by the county

[Sandtrap]

Where I live in CA there are lots of empty blocks of land selling for a fraction of what they were going for 20 years ago. That's because they are nearby areas which have been hit by wild fires and people and insurance companies have fled. It's a classic emotionally driven sentiment that creates tremendous buying opportunities. These are still pristine areas within a few hours of major metropolitan areas but the cost of fire insurance is $5K+ for $300K homes and home insurance is the same. And it's still California so desirable at many levels.

To diversify outside of just stocks I was thinking of buying several adjacent blocks for about $100K and just sit on it for a decade if needed and reevaluating the situation by selling or building a get-away home.

I figure my annual costs would be just 3% as follows:

$1K property tax (1% of purchase price)
$2K to remove the fire risks required by the county

to op:
question:
1
100k "each" and buying several = 3 or more?
(do you have 300k in cash to buy and sit on for 10 years???
Mortgage/loan or cash? (source of funding/loan)?
2
Do you have experience developing vacant land for profit?
Do you have the "working capital" (lots) to do this?
3
what would you have earned with 100k if you invested it in your own market based financial portfolio in 10 years, vs if the "vacant block of land" remains or becomes unsellable, unless for the same 100k or less 10 years from now?
4
If one of these "vacant lots" is in an area/neighborhood of homes (next door), are there any of these homes for sale? How long on market on average? Average "curb value" selling / sales price? (what they sold for, not what they are asking)??

** Note: if these "vacant blocks of land" had very positive profit projections, major and professional land developers would have already bought them up. Or very quickly once on the market for sale, often before they are listed or known to the public. What is usually availble to the public, and remains for a time, are the "leftovers", "money pits", "white elephants", etc.

j

[Jack FFR1846]

Do you have a plan to do something with the lots? Can they be harvested for lumber? Farmed? I think you're looking at them as building lots only but land can be used for other things. I once did invest in a medium sized single lot of 81 acres. My intent was to use it as an investment to eventually either build a house on or sell at a profit. Shorter term, I considered harvesting firewood. I decided to go back to college so sold it at a decent profit and my dad who recommended I buy it negotiated with the mortgage holder, the seller to accept a lump payment lower than what was owed and they accepted. This lot was within reasonable driving time to the nearest city. About 15 minutes. Of course, this was in Western Massachusetts, not California where 3 hours is considered reasonable. I think you need a better plan. Buying lots where people are fleeing doesn't sound like a way to make money.

[retired@50]

... That's because they are nearby areas which have been hit by wild fires and people and insurance companies have fled. It's a classic emotionally driven sentiment that creates tremendous buying opportunities.

You think insurance companies make emotionally driven decisions?

Regards,

[mhadden1]

To diversify outside of just stocks I was thinking of buying several adjacent blocks for about $100K and just sit on it for a decade if needed and reevaluating the situation by selling or building a get-away home.

As a contrarian approach, this is a mighty one.

[TomatoTomahto]

I guess somebody has to buy them. I’m not expecting to live long enough. Good luck.

[Watty]

Investing in raw land is tricky since even if it is buildable now it might not be in the future because of changes in rules about water, sewer, septic system, zoning, etc.

I heard of a situation where someone bought land to eventually build their retirement home on. Decades later when then wanted to build there was a 5 acre minimum lot size but their land was only 4.8 acres. They could not get a variance or buy 0.2 acres from an adjacent landowner so they ended up with a very expensive campsite.

In another case I heard of someone who was trying to build on some land but they could not get a permit to attach a driveway to the road. The problem was that the road designation had been upgraded so that was no longer allowed. Neighbors had driveways but they were grandfathered in under the old rules. I never heard how that turned out.

Selling raw land can also be very difficult especially if adjacent land has been developed in undesirable ways so be prepared for that.

In you planning also be sure top budget for liability insurance in case someone gets hurt on your land and also to clear off trash when people dump stuff on your land. Having something toxic dumped on your land is also a risk.

[dknightd]

I occasionally think about buying vacant land.
Frankly, I consider it a bad habit. But it is fun to look.
To actually do it would require some serious research, unless I was doing it just for fun, and did not consider it an investment.
I'd want land near/on water. Or with a good view. Maybe a place where I could set up a somewhat permanent camp site. Maybe a cabin. And maybe sell one day for a profit.
One thing for sure, there is unlikely to be more land created during our lifetimes. It is tempting to buy some!!!

[retired@50]

One thing for sure, there is unlikely to be more land created during our lifetimes.

See link: https://www.bbc.com/future/article/2022 ... al-islands

Qatar is hard at work.

Regards,

[Raymond]

... That's because they are nearby areas which have been hit by wild fires and people and insurance companies have fled. It's a classic emotionally driven sentiment that creates tremendous buying opportunities.

You think insurance companies make emotionally driven decisions?

Regards,

It's an "emotionally driven sentiment" in the same way that a homeowner would likely prefer not to be burned to death in their house.

But maybe OP can make this land speculation work.

[KlangFool]

OP,

One word: liability. If someone dump chemical waste on your land, you are liable to clean it out. Or, there are some endanger plants or species in your land, then, you are not allowed to do anything on your land.

KlangFool

[dknightd]

One thing for sure, there is unlikely to be more land created during our lifetimes.

See link: https://www.bbc.com/future/article/2022 ... al-islands

Qatar is hard at work.

Regards,

A House Boat has crossed my mind more than once. But you'd need to find a place to park it.

[Hacksawdave]

I was a ‘land baron’ for exactly two days way back in 1988. A bank had bought and sub-divided a tract in the late 60s but never developed. Expansion into the Inland Empire was expected, and parcels were being sold. The growth and building rate were as promised, but just not in that location. It ranks as my worst financial/investment decision ever, not because of the damage it did but because of the damage I would still be paying for had I not rescinded. It is posted in the thread.

viewtopic.php?p=7200945#p7200945

36 years ago, there was no internet of Google view as there is today. What was my wonderful parcel is still a dustbowl of wasteland with no development or infrastructure. The game back then was to hope buyers let the three days elapse without rescinding the purchase in time. I would still be paying taxes for schools and services that do not exist in that area, but funds other developed areas in the county.

If the area is decimated and there are no plans to rebuild the utility infrastructures, who is on the hook to pay for the new infrastructure? On my barren tract, the first parcel pays for 100% of the cost for each pole and pipe. If two owners, it is split 50-50 for service to the tract, and then so on and so on. You have a lot of diligence to research and do before considering this.

[hoofaman]

Isn't there liability risk with owning land? If someone dumps waste on your property and environment remediation is required, or hurts themselves, aren't you liable? The poster above mentioned some other risks I wasn't even aware of. There are also property taxes and insurance (carry cost), transaction costs to buy/sell also high I would assume. If you eventually want to sell one day and the land has zero or negative value, what's the process like to disclaim the land? With stocks/bonds the most you stand to lose is your initial investment, but with land the losses could exceed your initial investment

[MrCheapo]

1. The blocks of land are all below $40K each so I would buy several for $100K in total.

2. I have working capital, but I would only build if it makes sense from my personal perspective.

4. These are vacant blocks in developed areas. Some blocks were just undeveloped as people got spooked off by the wild fires

Where I live in CA there are lots of empty blocks of land selling for a fraction of what they were going for 20 years ago. That's because they are nearby areas which have been hit by wild fires and people and insurance companies have fled. It's a classic emotionally driven sentiment that creates tremendous buying opportunities. These are still pristine areas within a few hours of major metropolitan areas but the cost of fire insurance is $5K+ for $300K homes and home insurance is the same. And it's still California so desirable at many levels.

To diversify outside of just stocks I was thinking of buying several adjacent blocks for about $100K and just sit on it for a decade if needed and reevaluating the situation by selling or building a get-away home.

I figure my annual costs would be just 3% as follows:

$1K property tax (1% of purchase price)
$2K to remove the fire risks required by the county

to op:
question:
1
100k "each" and buying several = 3 or more?
(do you have 300k in cash to buy and sit on for 10 years???
Mortgage/loan or cash? (source of funding/loan)?
2
Do you have experience developing vacant land for profit?
Do you have the "working capital" (lots) to do this?
3
what would you have earned with 100k if you invested it in your own market based financial portfolio in 10 years, vs if the "vacant block of land" remains or becomes unsellable, unless for the same 100k or less 10 years from now?
4
If one of these "vacant lots" is in an area/neighborhood of homes (next door), are there any of these homes for sale? How long on market on average? Average "curb value" selling / sales price? (what they sold for, not what they are asking)??

** Note: if these "vacant blocks of land" had very positive profit projections, major and professional land developers would have already bought them up. Or very quickly once on the market for sale, often before they are listed or known to the public. What is usually availble to the public, and remains for a time, are the "leftovers", "money pits", "white elephants", etc.

j

[MrCheapo]

Investing in raw land is tricky since even if it is buildable now it might not be in the future because of changes in rules about water, sewer, septic system, zoning, etc.

I heard of a situation where someone bought land to eventually build their retirement home on. Decades later when then wanted to build there was a 5 acre minimum lot size but their land was only 4.8 acres. They could not get a variance or buy 0.2 acres from an adjacent landowner so they ended up with a very expensive campsite.

In another case I heard of someone who was trying to build on some land but they could not get a permit to attach a driveway to the road. The problem was that the road designation had been upgraded so that was no longer allowed. Neighbors had driveways but they were grandfathered in under the old rules. I never heard how that turned out.

Selling raw land can also be very difficult especially if adjacent land has been developed in undesirable ways so be prepared for that.

In you planning also be sure top budget for liability insurance in case someone gets hurt on your land and also to clear off trash when people dump stuff on your land. Having something toxic dumped on your land is also a risk.

Thanks. I should have explained the proposition a bit better. I did edit the original post to reflect this. I'm not talking about land in the middle of nowhere. Rather blocks of undeveloped land in an established division. So there are utilities at the property boundary. Some lots are already developed but most are empty.

[MrCheapo]

... That's because they are nearby areas which have been hit by wild fires and people and insurance companies have fled. It's a classic emotionally driven sentiment that creates tremendous buying opportunities.

You think insurance companies make emotionally driven decisions?

Regards,

It's an "emotionally driven sentiment" in the same way that a homeowner would likely prefer not to be burned to death in their house.

But maybe OP can make this land speculation work.

I meant the home owners were emotional. Insurance rates went up 50% in one year and this was interpreted as a yearly event which it won't be.

[MrCheapo]

I was a ‘land baron’ for exactly two days way back in 1988. A bank had bought and sub-divided a tract in the late 60s but never developed. Expansion into the Inland Empire was expected, and parcels were being sold. The growth and building rate were as promised, but just not in that location. It ranks as my worst financial/investment decision ever, not because of the damage it did but because of the damage I would still be paying for had I not rescinded. It is posted in the thread.

viewtopic.php?p=7200945#p7200945

36 years ago, there was no internet of Google view as there is today. What was my wonderful parcel is still a dustbowl of wasteland with no development or infrastructure. The game back then was to hope buyers let the three days elapse without rescinding the purchase in time. I would still be paying taxes for schools and services that do not exist in that area, but funds other developed areas in the county.

If the area is decimated and there are no plans to rebuild the utility infrastructures, who is on the hook to pay for the new infrastructure? On my barren tract, the first parcel pays for 100% of the cost for each pole and pipe. If two owners, it is split 50-50 for service to the tract, and then so on and so on. You have a lot of diligence to research and do before considering this.

Thanks for the warning. I should have been clearer, I was referring to tracts of land in already developed areas. For example, a developer subdivides a block of land, places utilities at the land boundaries, and then sells blocks of land. Some blocks are developed but others are not as people got scared away. It is these blocks which I'm looking at.

[justworld]

Without going into specifics of OP's individual situation, I think it's always a good idea to hoard land - there's never more land created, and the population isn't shrinking in first-world countries, so hoarding a scarce resource is economically sound. The main thing you want to look at are (1) climate-related risks - avoid certain climate types which are more susceptible to global warming; (2) regulatory risks - governments love land taxes as no one will oppose them. But overall I am surprised big institutional investors aren't looking more into land banking or simply buying up lots of homes.

[GAAP]

As the saying goes, all real estate is local. I've seen empty lots remain empty for decades, while other down the street were developed immediately. I know of one lot that was empty in 1972 and is still empty today (and yes, in CA).

Diversification would be critical in my mind -- lots of lots in lots of different places, preferably in different MSAs.

[Thick Planchet]

Go ahead. It’s only $100,000 but you will need to attend to it in order to avoid liability--pay taxes, insurance and monitor it.

[exodusNH]

Without going into specifics of OP's individual situation, I think it's always a good idea to hoard land - there's never more land created, and the population isn't shrinking in first-world countries, so hoarding a scarce resource is economically sound. The main thing you want to look at are (1) climate-related risks - avoid certain climate types which are more susceptible to global warming; (2) regulatory risks - governments love land taxes as no one will oppose them. But overall I am surprised big institutional investors aren't looking more into land banking or simply buying up lots of homes.

Given the demographic trends in developed economies, it won't be long before populations actually start shrinking. South Korea and Japan are already seeing population declines.

The US has more time than many other developed countries, a combination of baby boomers having had many children and immigration, but our birthrate has been below the replacement level for 50± years and is currently at its lowest ever.

[BrooklynInvest]

It'd be a hard no for me.

With stocks I've got millions of participants setting a fair market price for every transaction. With land I'm taking that valuation process on myself and there's a strong likelihood I do it badly. Then there's the entry and exit costs. All money going to intermediaries and not my portfolio.

Granted, you could do all of this well and your gamble could outperform an index portfolio. But why gamble?

Good luck OP.