Vacant lots can be a ripe source of income for commercial investors. As with any real estate deal, choosing the right property is an essential component to a profitable outcome.
Use these strategies to find the ideal commercial land tract for purchase.
Target surrounding expansion
When several housing developments are popping up in a rural or semirural area, retail and commercial services are sure to follow. Get in front of this boom by purchasing lots in up-and-coming areas. As this limited land increases in demand, you can stand to gain a healthy profit.
Account for risk
Build delays and cost increases into your project timeline and budget. Finding a tenant for commercial land can take several months, so you must prepare to hold the property without profit for an indefinite time depending on the history and geography of the lot as well as trends in the local market.
Consider off-market land
Even if a lot you have your eye on is not currently for sale, you can still approach the landowner with an offer. Doing so allows you to avoid broker costs and other fees you incur when you purchase a lot on the active market. You also have the power to offer what you think is a fair price since the potential seller has not already established a listing price.
Perform due diligence
A smart investor considers the best possible use for vacant land when deciding whether to make a purchase. As part of this process, you must consider the land’s zoning classification, which provides insight into available industrial, commercial, residential and mixed use. Other factors to research include the topography of that specific tract, the tax obligation for the land and the availability of public utilities including water, sewer, electric and cellular service.
Easements, mineral rights and land use restrictions may also affect potential land usage. Account for all these variables when weighing a particular parcel for commercial investment.