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Should You Ever Hold Raw Land as An Investment?

Posted by James Burns | Jul 11, 2023 | 0 Comments

When it comes to investment opportunities, land banking has emerged as an intriguing and potentially lucrative option for astute investors. By acquiring raw land and holding onto it for future development or sale, land banking offers a range of benefits and unique advantages. In this article, we will explore some of the most compelling reasons why investing in land banking could be a wise decision for those seeking long-term growth and financial security.

  1. Tangible Asset with Intrinsic Value: Unlike other investment options that rely on market fluctuations and economic trends, raw land is a tangible asset with inherent value. Land is a finite resource, and as population growth continues, the demand for usable land is expected to rise. By investing in land, you acquire an asset that will always have value, making it a reliable store of wealth.

  2. Potential for Substantial Returns: Land banking presents an opportunity for substantial returns on investment. As urbanization expands and development progresses, strategically located parcels of raw land can experience significant appreciation in value. By identifying promising locations and acquiring land before development reaches those areas, investors stand to benefit from the rise in land prices, potentially yielding impressive profits.

  3. Diversification and Risk Mitigation: Investing in land provides diversification benefits to your investment portfolio. Land typically exhibits a low correlation with other asset classes such as stocks, bonds, or even real estate. Therefore, adding land to your investment mix can help mitigate risk and reduce exposure to market volatility. This diversification can enhance the stability and resilience of your overall investment strategy.

  4. Potential for Development Opportunities: One of the primary advantages of land banking is the potential for development opportunities. As cities expand and population growth surges, the demand for residential, commercial, and industrial spaces intensifies. By securing well-located land parcels, you position yourself to capitalize on future development prospects. This can involve selling the land to developers, partnering with them, or even developing the land yourself to unlock its full potential.

  5. Long-Term Appreciation and Inflation Hedge: Land has historically demonstrated strong long-term appreciation, often outperforming inflation rates. Investing in land offers a hedge against inflation, as the value of land tends to increase over time due to its scarcity. By holding onto land over the long term, investors can preserve and grow their wealth, providing a reliable buffer against the erosive effects of inflation.

  6. Limited Holding Costs: Compared to other forms of real estate investment, land banking often incurs lower holding costs. There are no construction or maintenance expenses typically associated with developed properties. Furthermore, land banking requires no ongoing management or tenant-related issues. These lower costs contribute to potentially higher net returns on investment.

  7. Tax Advantages: Land banking can offer tax advantages to investors. Depending on the jurisdiction, the purchase and holding of land may be subject to favorable tax treatments, such as lower property tax rates or tax incentives for long-term holding. Understanding and utilizing these tax benefits can further enhance the overall returns on your land investment.

Conclusion: Land banking presents a compelling investment opportunity for those seeking to diversify their portfolio, achieve long-term growth, and hedge against inflation. With its tangible nature, potential for substantial returns, and inherent value, raw land is a unique asset class that offers numerous advantages. However, like any investment, thorough research, due diligence, and a well-defined strategy are crucial. By carefully evaluating locations, growth potential, and local regulations, investors can harness the power of land banking to unlock significant financial rewards in the years to come.

It is also important to note that you should consider holding your land in an LLC or your living trust to ensure Probate avoidance and LLC for liability protection.

About the Author

James Burns

Estate Planning, Asset Protection, Business and Real Estate Transactions, nutraceutical Law and franchising:


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