Early settlers and pioneers in the United States were in search of freedom, adventure, and prosperity that lay in the land. Pioneering investors are always seeking that same prosperity, whether in live event venues, laundromats, or — under it all — the land.
But what makes land a good investment if you aren’t a farmer?
1. They Aren’t Making Any More of It
Land is a tangible asset with inherent value. Purchasing in areas with positive population and job growth provides the baseline for appreciating land values. Rural land can hold value for other reasons as well — see #4 below.
2. No Maintenance
Investing in land affords investors greater control over their assets compared to other real estate investments. Unlike rental properties, which require ongoing management and upkeep, land can be a hands-off investment with minimal operational overhead. Land is also easier to buy in areas where you aren’t local, since there’s no maintenance to coordinate.
3. Potential for Appreciation
While land itself may not generate income the way rental properties or commercial buildings do, it has the potential for substantial appreciation over time. Factors such as population growth, urbanization, infrastructure development, and rezoning can significantly increase land value. If you don’t need or want cash flow because of the taxes you’d pay on it, a land investment with upside in capital gains may be ideal.
4. Diverse Investment Avenues
Investing in land opens up a wide range of avenues for diversification. Whether it’s agricultural land, undeveloped lots, or parcels with development potential, investors have the flexibility to choose assets that align with their risk tolerance, investment horizon, and financial goals. Land investments can also span multiple geographic regions, allowing investors to hedge against local market downturns and capitalize on opportunities elsewhere.
Money-Generating Activities Associated With Land
- Leasing ground to a farmer — lease rates vary with soil quality; expect $350–$1,000 per acre per year.
- Leasing ground to a solar company — increasingly common in Pennsylvania because of net metering laws; average lease payments run $2,000–$3,000.
- Mineral rights — much of rural Pennsylvania has seen significant natural gas production, and the value of mineral, oil, and gas rights can be substantial for the right landowners.
- Commercial ground — leasing sites to high-profile retail users is relatively common, with lease rates of $80,000–$130,000 per year for a 1–2+/- acre pad site.
- Truck parking — tractor trailers need somewhere to sit when not in transit; trailer parking can bring $95–$150 per trailer per month, with proximity to warehousing and highways essential.
- Waterfront land — parcels along a desirable waterfront can be ground-leased to homeowners to build on under long-term assignable leases, with rates ranging from several hundred to several thousand dollars per month depending on location.
- Land for hunting — hunters will pay to lease land to pursue their hobby.
- Timber land — many hardwoods present substantial value when harvested.
- Development — saved for last, since it’s a whole other discussion. If you purchase in the path of progress and are patient, this can reward you for years to come. Seek guidance from qualified professionals on the right locations, ideally in business-friendly areas that encourage development overall.
The Bottom Line
By incorporating land into their investment portfolios, investors can unearth a wealth of opportunities and solidify their financial footing for generations to come. Many of our clients are looking to benefit from land investing but are concerned about the risk of losing value. We provide key insights from our experience so you can collect the checks and enjoy the deal.
