Unlocking the Potential: Understanding the 3 Phases of Land Investing
Investing in land can be an excellent opportunity for those looking to diversify their investment portfolio. However, it's important to understand that land investment is not a one-size-fits-all approach. Instead, there are three different phases of land investing that investors should be aware of. These phases include the owner phase, subdivider phase, and developer phase.
PHASE 1 - OWNER
The first phase of land investing is the owner phase. This phase involves purchasing land for long-term holding, typically between 5-10 years. Investors may choose to use the land for recreational purposes, lease out sections of the land for cash flow, or even build on the property. The return on investment for the owner phase is mainly focused on appreciation and cash flow from leases. The initial investment for this phase includes the cost of the land plus maintenance, which typically comes out to around $15,000.
PHASE 2 - SUBDIVIDER
The second phase of land investing is the subdivider phase. This phase involves purchasing a larger tract of land and dividing it into a few lots. The lots in this phase are larger in size, and the process of land division is learned. The subdivider phase is typically focused on creating a higher-priced product and generating a profit. The initial investment for this phase includes the cost of the land plus maintenance and planning, which typically comes out to around $30,000.
PHASE 3 - DEVELOPER
The third phase of land investing is the developer phase. This phase involves purchasing a larger tract of land and dividing it into lots. Developers will focus on site work, installing roads and curbs, partnering with builders, and attending public hearings. The return on investment for the developer phase is focused on creating a high number of products and selling them for a profit. The initial investment for this phase is much larger than the previous phases and includes the cost of land, maintenance and planning, and infrastructure. Developers will typically see a return of around 70% of total revenue or a profit margin of 20-30%.
Overall, each phase of land investing offers its own unique opportunities and challenges. Investors should consider their goals and financial situation before deciding which phase to pursue. With the right strategy and approach, land investing can be a profitable and rewarding investment.