Why Invest in Land Real Estate for Retirement?
In my former life when I was selling insurance and investments for Prudential-Bache, I remember one middle-aged gentlemen saying he was using land as his retirement portfolio. I knew about insurance, stocks, bonds and 401k’s as a retirement vehicle, but not land real estate.
As I got older (more mature as my wife says) and started selling real estate as an auctioneer and real estate broker, I realized investing in land real estate can be a great way to save long term for retirement.
But I also learned as I did with stock, bonds, etc., that you needed to know what type of land to invest in, what area to invest in, and your expected return on your money.
Any stock portfolio manager will tell you that you need to be diversified and that goes with land investments. As stocks and bonds can go up or down, land values can vary over time. But if you invest in different areas, you can protect yourself from market conditions. As in stocks, bonds, etc., there are no guarantees.
According to Warren Buffett (http://fortune.com/2018/02/14/economy-stocks-warren-buffett/) you can expect about a 6 to 7 percent long term in the stock market. But according to Harvest Returns, (https://www.harvestreturns.com/blog/2017/6/27/
investing-in-agriculture-vs-investing-in-stocks/), farm land has produced a steady 11.5 percent annual return over the past twenty five years. If you are familiar with the Rule of 72, this means your land investment could (no guarantee) double every 6.26 years.
I recently sold my sons house in Wake Forest because he got tired of the required maintenance. He wants to buy land and maybe build on it later. To him, this means no repairs or renovation, like new granite kitchen counter top, new A/C unit or roof, but only keeping the land cut and cleared if not wooded.
Farm land is cheaper than developed land. But just like residential homes, you have “flippers” out there that have owned the land for a short period of time and want to sell it. The question is: Why? Did they find something wrong with the land? Farm land takes time to grow in value unless someone like Amazon or Google wants to come in and put a building on it.
Timberland and forestland are also excellent investments. Timber can provide you with returns for many years if you are a younger person at least ten to fifteen years from retirement. Cutting ($$$) then replanting does not give you a return as the trees grow, but once they mature, they will provide you again with a good return.
Before investing in land real estate, proper due diligence is required, viz., usage restrictions if any, zoning, easements, taxes, mineral rights and flood zone, any wetlands, etc.
Land real estate is a limited commodity. As my uncle said in a previous blog, they don’t make any more of it. It can be an excellent retirement vehicle as you diversify your portfolio. Need to know more, call us at 252-257-4822 or visit our website at www.cansellnow.com .