Most real estate investors are already familiar with the concept of house flipping. They buy a house, make a few upgrades, and sell it at a higher price to make a profit. Savvy investors often go the extra mile to repair the home and start renting it out before selling it down the road.
However, a lesser-known technique is land flipping. It offers an excellent opportunity for those looking to invest in real estate and diversify their portfolios because a land flip has a great return on investment. Land flipping deals are usually easier to find and more affordable to fund compared to houses. Moreover, the land is protected against recession, unlike any other real estate type.
If you think this is something you could do, check these major dos and don’ts.
Do the Math
Before you make an offer for the piece of land, do the math to learn how much it will cost you to buy the property, including closing expenses. Then calculate how much you’ll be able to get for it. Your aim should be to make a decent return after costs, otherwise, the deal isn’t worthwhile.
Do Make Some Improvements
If your budget permits, you can make some improvements once you've purchased and registered the land. Raking the dead leaves, fencing off the area, removing unsightly plants, or constructing a driveway, may help potential buyers see the possibilities in otherwise "unwanted" land. You can also consider providing access to utilities like electricity or water before you sell. Do everything you can to make it easier for potential buyers to recognize your property's worth and future possibilities. This will guarantee a faster flip and greater profits.
Do Take Time to Locate the Ideal Buyer
Start preparing for selling before you even close the transaction to have more time to reach a broader pool of target buyers and create interest for the property. Assemble a "for sale" sign, create optimized listings for MLSs, and leverage social media to find the right buyer. That being said, you must be prepared to hold onto land for a while because you never know how long it will take to locate the ideal buyer. Fortunately, your only expense will be nominal property taxes for undeveloped land.
Don’t Go In Blind
If you’re new to the land-flipping world, take some time to explore the markets. Not every area will have the same type of land at the same price. Look around to identify the type you want to flip. The process also involves learning the zoning and local and state regulations that might apply to raw land transactions. Finally, determine the budget you’re comfortable spending for the deal.
Don’t Overlook the Importance of Location
The key to successfully land flipping is to find land that is or might be in demand. Even though land can be a lucrative resource, its value mainly depends on location and potential use. It’s best to look for land in up-and-coming areas. Drive around the neighborhood, and look for properties under development to see if other people are investing there. Also, see if there are recently opened stores and restaurants. Moreover, you could check with local authorities to see if they have any plans for developing the neighborhood. If things like repaving roads and building new sidewalks, parks, and playgrounds are on their agendas, it means that the area will continue developing and becoming more desirable.
Don’t Write Off Owner Financing
Leveraging owner financing can be beneficial when flipping land. You and the buyer must agree on a down payment, a monthly payment, and an interest rate. Remember that you must make the buying process simple for them to acquire the best pricing. There's a chance a buyer won't continue to pay, in which case you'll have to foreclose on the contract to reclaim your property.
Don’t Fall in Love with the Property
It’s not uncommon for first-time land flippers to get emotionally attached to the property. But that’s a big no in the land flipping business. To succeed, you must keep your eye on the prize. Also, when making improvements, don’t be tempted to do something just because you love it. Remember that you are improving the land to appeal to the general market, and doing the opposite can decrease your chances of selling the property fast.
It’s perfectly possible to make profits by flipping land. However, it’s crucial to know what you’re getting yourself into and which techniques you need to master to flip land successfully. If you decide to pursue this business, implement the tips learned in this article and you’ll be off to a great start.
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