Vail Ask a Realtor column: Is buying land a good investment?
Dear Joan: I have been getting free advice from friends and family about making a real estate investment in land. I realize the advice is worth what I am paying for it — nothing — but it is still making me worry. They are saying that a land purchase for investment simply costs you money every year in taxes, weed control, insurance, etc., and does not bring you any income like a residential rental would do. I know they are right, but I hate dealing with tenants and I believe land can pay off with increased value in the future. I would like to make my decision soon. What are your thoughts?
Possible Land Investor
Dear Possible Land Investor: In a nutshell, most of the things your friends are saying are very valid points. Raw land usually is a cost, and hopefully, residential rentals bring income. As we all know, rental can be difficult, can go vacant, can be damaged and can need big repairs suddenly. Also, as a rule of thumb, residential properties sell faster than land.
These are, of course, gross generalizations, but if you lump all residential properties in the valley into the same category, and use all of the total sales, under-contract properties and the current number still on the market, then we have about 6.5 months of residential inventory to sell. If you do the same for all land, then we have 21 months of land inventory to be sold.
One interesting factor we have not discussed yet is that in Eagle County, there is a disproportionate number of residential properties that, when rented, will not generate “income,” although they may defer some of the high expenses of maintenance.
This fact starts to make a prudent land investment look better, since the financial success of higher end residential is based on acquiring equity, just the same as the financial success of the land purchase, and the carrying costs could be considerably less.
Lastly, I think it is always important to add in enjoyment. Ideally, everyone who has an investment residential property is enjoying the pleasure it brings to their families and friends year-round.
If you buy a residential unit that cash flows, but you are miserable chasing down the rent and doing repairs, then you might truly enjoy driving by your lot, camping on your mountain acreage or fishing from your land on the river much more. As always, I recommend relying heavily on your knowledgeable Realtor to help you pick your investment, no matter which direction you decide to go. Best of luck to you.
Joan Harned is an owner and broker for Keller Williams Mountain Properties and heads up Team Black Bear, her own real estate team. Harned has been selling real estate in Eagle County for 27 years. Contact Harned with your real estate questions at firstname.lastname@example.org, 970-337-7777 or http://www.skiandteehomes.com.
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