Land flipping?
You can actually flip land?
Like … just dirt?!
That’s right.
Land flipping (similar to buy and hold land investing) is packed with many advantages for real estate investors …
No tenants necessary …
Less upkeep …
Growing demand …
And much more.
But it’s not without its challenges.
Here’s the big question: is land flipping right for you?
If you’re ready to learn everything you need to know about land flipping, let’s get started!
What is Land Flipping?
Think of it as real estate investing on a diet. You buy a piece of undeveloped land, improve it a bit, let it marinate for a while, and then sell it for a profit. No walls, no renters, just you and the great outdoors.
How does it work?
- Buy Low. Snag that sweet piece of land at a bargain.
- Hold Tight. Be patient, grasshopper. Let the land appreciate in value.
- Sell High. When the market’s sweet and ripe, sell it off and count your profits.
Easy peasy, yes?
Well, not so fast. You have to know the market, do your homework, and maybe throw in a bit of luck.
But hey, no guts, no glory!
Continue reading and we’ll reveal the 5 magic steps of land flipping in a bit. (For real. This ain’t clickbait.)
Why Flip Land?
Good question! And there are several answers to that.
Why’s land flipping cool: Land Flipping Advantages
- No Tenants. Forget about late-night calls for clogged toilets.
- Less Upkeep. No need to stress over paint jobs or lawn care. Fewer maintenance issues. It’s just land!
- Fast ROI. Unlike house flipping, you can resell without renovating or developing.
- Lower Initial Costs. Compared to buying properties with structures, land purchase requires lower cash upfront.
- Variety. Invest in small plots or vast expanses and tap into various markets, from residential lots to agricultural parcels. Much like a real estate playground.
- Lucrative Investment Strategy. It’s not uncommon to gain an ROI of 100% to 200%. Yes, I’ve seen it myself! Really!
- Consistently Growing Demand. Urban areas continue to expand and land sales have increased at a 1.2% rate in 2023.
- Flexibility. Hold or sell at the right moment to significantly boost your returns.
The other side of the land flipping coin: Land Flipping Disadvantages
- Market Fluctuations. The volatile economy can unpredictably impact land values.
- Zoning Laws. Imagine buying a plot to sell for house building, only to find out it’s within an agricultural zone that forbids non-farm use. Whelp!
- Environmental Restrictions. These can sometimes limit development possibilities and require careful due diligence.
- Financing Challenges. Traditional lenders often view land as a riskier investment compared to developed properties.
Despite these hurdles, with thorough research and strategic planning, the rewards of land flipping can be substantial.
Funding for Land Flipping
Okie dokie, let’s talk moolah. You’ll need some dough to buy that prime piece of dirt.
Where’s it gonna come from?
Here are creative financing options:
- Cash. Straight-up dollars. If you’ve got green bucks stashed away somewhere, this is the simplest way.
- Private Investors. Know someone with extra gravy? Convince them to back your land flipping dream.
- Hard Money Lenders. The rockstars of quick financing. They grant fast but charge higher interest. Ah, well, the price you pay for being cool.
- Seller Financing. Sometimes, sellers act like banks. You pay them over time, and everyone leaves happy.
- Crowdfunding. Yep, go online and get a bunch of folks to chip in. Pass the hat around via the internet.
- Retirement Fund. Consider a Self-Directed IRA. It’s a regular IRA on steroids, letting you invest in things like land.
- Land Contract Deals. You pay the seller in installments, and once you’re done, the land’s all yours. No middlemen, just you and them.
Is there a way to fund this gig if your credit is less than stellar?
Yes! Look into lease options. You lease the land with an option to buy — kinda like a try-before-you-buy scenario.
Funding isn’t one-size-fits-all. Choose what fits your style, wallet, and comfort level.
And if you’re looking for more info on this topic, check out our land flipping loan guide.
How to Flip Land in 5 Steps
Here’s your step-by-step guide to successful land flipping:
Step 1: Find and Fund Your Golden Plot
Hunt down a prime but undervalued piece of land with good resale potential as a future residential or commercial area. Rummage through online listings, attend property auctions, and ask local contacts for foreclosures. The thrill of the chase!
Factors to consider:
- Location, Location, Location
Yeah, that’s a cliche, but it also happens to be true. And, in land flipping, it means steering away from areas where competition is stiff, such as Arizona, Florida, and Texas.
Are there specific regions where land flipping is more profitable?
The best states for profitable land flipping opportunities are Arkansas, California, Georgia, New Mexico, North Carolina, Tennessee, Virginia, and Washington.
- Development Trends
Avoid areas without planned expansions. Lands there seldom appreciate without upcoming projects. Remote and inaccessible regions are also hands-off as they make poor investments and might incur losses.
How will you know if the land you’re eyeing is within a development zone?
Head over to the county’s Development Department and grab a copy of their 30-year development plan.
- Local Market Demand and Property Taxes
Conduct thorough research, evaluate economic trends, and review the population growth to ensure the area has high potential. Keep in mind as well that high property taxes are a liability unless there’s clear value growth.
- Local Zoning Laws
Understand the zoning classifications: residential, commercial, industrial, agricultural, and mixed-use. Be aware that changes in zoning laws can impact property values, potentially lowering your resale price.
- Disaster Risk
Environmental conditions and natural disasters like floods, hurricanes, drought, landslides, earthquakes, and wildfires often lead to lower property values and increased insurance costs.
- Accessibility
No one wants land they can’t conveniently reach so don’t overlook right of way, and buy it when necessary. Your buyers would also be interested in building a home near schools, hospitals, parks, and shopping centers. Access to water, electricity, internet, and sewage are essential, too.
Do Your Homework
Knowledge is power, and you don’t want any surprise plot twists (now there’s a pun). It’s best to hire a land surveyor, a lawyer, and possibly an environmental consultant.
Get Funding
As mentioned above, choose your method—cash, private investors, hard money lenders. Secure your treasure chest.
Step 2: Make an Offer and Seal the Deal
Time to negotiate like a pro and channel your inner land flipping shark. I’ve learned the ideal purchase price is 5% to 35% of the land’s market value.
Plus, here are a couple of non-negotiables in this step:
Due Diligence
Inspect the land. Verify boundaries and check for environmental issues, legal encumbrances, and access to utilities. Dot those i’s and cross those t’s.
Hire a Title Company
Title companies are the best way to ensure your future property has a clear title without disputes or liens. They will take care of your HUD (U.S. Department of Housing and Urban Development) documentation, Title Commitment, and handling of payment to the seller.
Sign on the dotted line, and make it official. Pop the champagne!
Step 3: Enhance Your Land’s Appeal
Enhancing your land’s appeal can go a long way. Maybe clear some brush, add a fence, install a driveway, or even create an access road. For larger properties, consider subdividing them into smaller, more affordable sizes.
Step 4: Market Like There’s No Tomorrow
Announce your offer to the world online, offline, smoke signals, message in a bottle — whatever works!
Here are better ideas, though:
- Enlist an agent, preferably one who specializes in land flipping
- List in popular real estate websites like Craigslist, Facebook, and MLS
- Post drone shots in your listings and social media accounts
- Parcel Overlays
What’s important is that you sell your asset before holding costs set in. Remember, it isn’t generating income from rentals but you’ll continue to pay property taxes and insurance until someone else takes the responsibility.
Finally, Sell High
This is the moment you’ve been waiting for. Field offers, negotiate, and sell to the highest bidder. Cha-ching!
Step 5: Rinse and Repeat
Like a shampoo commercial, but way more profitable. Take what you’ve learned and do it all over again.
From your experience, you’ll be able to decide which of these two land flipping types fits your style:
Speculative (Long-Term)
This approach involves purchasing land with future development potential. The aim is to hold onto the property until market conditions or zoning changes boost its value, then sell for a profit. It’s a strategy that requires patience and market insight.
Value-Added (Short-Term)
Enhance the property’s appeal before reselling. Improvements might include clearing the land, adding access roads, or installing basic utilities. These upgrades significantly boost the land’s resale value.
The Bottom Line: Flipping Land
Now, let’s wrap this up!
Land flipping is akin to playing a high-stakes game of chess. You’ve gotta think a few moves ahead, know your pieces, and sometimes, take a bold risk.
So, what’s the final verdict?
If you’ve got the patience of a saint, a nose for opportunity, and a bit of capital, land flipping can be a goldmine … that is, if you do it the right way.
