Posted: Tuesday, May 09, 2023
Author: Vinny Delgado, Partner, Ranch Sales | Licensed in MT
Dear Vinny,
I would consider myself a fairly savvy investor with a somewhat diverse investment portfolio. However, I have recently heard some of my friends talk about investing in land. At first thought, I really liked the idea, but I am unsure if it’s the right move for me. What are some of the biggest reasons why someone might ditch their commercial asset in favor of a land asset?
- Sometimes Savvy
Dear Sometimes,
The #1 reason I recommend investing in land is because it is a finite asset. Investing in land not only diversifies an investment portfolio but can also provide a place of joy and respite. Unlike a commercial building that blocks the sun and creates revenue, land is something that can become very personal. If you think land will show you a 12% cap rate like some commercial investments, then I wouldn’t recommend the investment. However, land is typically a safe place to park money and, on average, will show a slow 3%-5% annual return. Many of our clients will park money in land for a 10–15-year hold and then move into something else, and others will fall in love with the land and never sell. What is nice about land is that it is all in the eye of the beholder; if you want a short hold and flip, great; if you want a safe place to retreat, land can be your insulator. There are many reasons people invest in land, and it all just comes down to the individual and their personal goals.
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