Vulture6

A couple of things to consider in buying land - especially land that is suitable for hunting:

1. Property taxes -- if you are doing a "buy and hold while the property appreciates in value" remember that property taxes must be paid every year, and they can be significant, depending on the land, where it is, and how it is zoned.
2. Encroaching development -- if the area is already being developed, then the land value will already be steep and the taxes increasing.
3. Timber / lumber -- frequently, you can designate the property as private forest, which will limit development and decrease taxes. You don't have to harvest timber off of it, but it would be a way of producing income from the land.
4. Forest fires - depending on where you live, this is one way to lose money on a crop that takes decades to mature to harvest.
5. Upkeep - in addition to property taxes, there will be other costs associated with the upkeep of the land, depending on where it is and what type of land it is. It's kind of like owning a boat -- there's always something that requires money.
6. Depending on where you live, land isn't cheap (in most cases -- or at least around here!)

BobCo19-65

Property taxes are killer in my neck of the woods. I could get one heck of a lease for the amount I spend on taxes each year for my property.

MountainHunter

It’s an unusual situation, but land can drop in value. Just ask people who lived in Dallas, Austin or Houston in the early and mid-1980’s. Land prices dropped by more than half in about a year-and-a-half. Land prices in the Boston, MA and Washington, DC areas also dropped about 10%-15% in the early 1990’s.

Generally this doesn’t happen, especially in rural areas, but it can if there has been a lot of speculation. And, as an economist, I’d say that right now is a likely time for this to be happening in SOME markets, due to speculation, the housing credit crunch that I think we’re just starting to see, and the resulting large inventories of unsold real estate. The good news is that land prices always eventually come back up, if you’re patient (sometimes it takes 6 or 8 years…).

The “problem” with real estate deals is, if you finance them, which is the way most people leverage their buying power, it can greatly increase your profits in an up-market, but, in a down-market, it can backfire even more than stocks can. Here’s how: Let’s say you put down 10%, and prices drop by 15%. Then, you essentially have to pay someone 5% just to take your land from you, not counting closing costs, etc. Since you can’t generally finance stock purchases, this never happens in those markets. By the way, the reason people can’t buy stock on margin any more is because this is essentially what propelled the stock market crash of 1929, which was a major factor in starting the Great Depression. I think it’s really pretty scary right now in real estate, at least in some markets.

You should look at your specific market and see how land is moving before you invest.

FroMan

Pretty sure it almost always gains and never loses. There's alot more people every day and there's not any more land getting made.

Talondale

The problem with investing in land is that A: it's expensive in large quantities B: you usually have to provide at least 25% up front to borrow money to purchase landbecause it's considered an investment loan unless it has a house on it you plan on making your primary residence.The positive iswith land investments you will never have a total loss, you may not be able to sell the land but it will still be yours. Over the long haul prices should continue to increase but not necessarily at a rate that out performs other forms of investment. It all depends on the location and market.

geterdun2

excellent responses. thanks alot guys

Howler

Are you sure about that? I have 180 acres of farm/pasture/creek in KS. and my property taxes are a little over $900/year! I find it very hard to beleive that your's are only $69/year!

Bowhunter2001

How much would you care to wage on it? Any amount and I will give you 10 to 1 odds. Let me know. The funny thing was they went up almost $20 dollars this year.

Howler

I guess it seems strange that the land prices in your area are that dang high, about 4 times higher than where my land is, but yet your property taxes are about 13 times lower!

I paid $575/acre three years ago. Now land is selling around $750-$800/acre.

Bowhunter2001

They are low for the farmers benefit. It is considered farm ground.