Way back in 2012, I happened upon a small rental property with 16 Acres of Raw Land. I knew what I was going to do with the 2 bedroom 1 bath house, but the Raw Land, this was something I had never had any experience with.
In this post I will share 10 years of ‘Hard Knocks’ experience I’ve gained with my Raw Land Investment and provide some guidance you may use in order to prepare yourself for buying Raw Land, along with some options you can use to cash-flow your Raw Land.
For starters; Invest in a good mower, or animals with an insatiable diet for grass.
Unless the raw land you buy is covered with trees; lakes, or a quarry, you’re most likely going to need a way to maintain the height of the grass. This can be done with a mower, or a tractor with a bush hog attachment. You could also find a farmer who’s willing to cut hay on your raw land, which there should be no short supply of, especially during a drought.
I mean, who doesn’t love the look of round hay bales dotting the open fields at sunset?
But, cutting grass is no joke, it’s stressful, relentless and unapologetic. Not stressful in the ‘act’ of grass cutting, in-fact, riding on the mower can actually be relaxing. No, the stress comes from the nagging thought that you’ve always got to maintain the grass.
There are times when life gets busy and overwhelming, but the grass doesn’t take a break from growing. It continues it ascent toward the sun whether you’re able to cut it or not. Be ready for that.
A loan for a land purchase can harder to obtain than one for a primary residence.
Banks are more inclined to underwrite a loan with favorable terms, when there’s a dwelling involved. Banks don’t want to be in the land ownership business, should they ever have to foreclose on a loan. They prefer the collateral of a loan to include a structure on the land.
Raw land can be considered more speculative in the eyes of the banker. And, banks are in the mitigating risk business, so a loan for a land purchase usually requires a bigger downpayment, and may be as high as 30-35%.
Large National Banks are less interested in lending money for raw land. Your best bet is to find a small, local bank or a credit union who better understands the value of land in the particular jurisdiction.
And lastly, often times realtors charge a higher commission for land acquisitions than they do for single family homes, 6-6.5% is not out of the question.
Now that you’ve acquired the Raw Land, what can you do to generate income from it?
If your goal is to generate a return on your land purchase there are many good options, because land can be considered ‘multi-dimensional. Here are five great options for using your raw land to create a Return on Investment:
#1 Harvest Timber
I’m sure not everyone is a fan of this option, but the reality is, timber does need to be thinned out from time to time.
Timber can act as a serious combustible, as you see with the annual wildfires that occur in the western part of the United States. When old timber dies out and is not cleared, it creates a way for fires to spread rapidly, and so it’s good practice to harvest timber. Not to mention, younger healthier trees growing underneath struggle to mature into a healthy tree when a natural canopy exists.
There can be great value in harvesting trees, especially hardwoods like Red and White Oaks, Hickory, Walnut and American Birch. Softer woods such as Pine, Cedar, and Fir, have value as well but are less desirable than their Hardwood brethren. For more information on the desirability of 64 different types of woods, here is a great post from startwoodworkingnow.com
#2 Raise Cattle
This is an option I’ve had personal experience with. Here are the 4 heifers (female cows who have never given birth) whom helped me maintain my grass height one summer:
They were gentle, curious, and some of the best tenants a raw land owner could ask for.
I wasn’t raising cows with the intent to harvest them (a kind word for ‘kill’), and I wasn’t raising them to sell, I was however, renting out my land to the owner of these cattle, so that he could put weight on them with the intent to sell.
He paid me $25 per month, per head, so $100 month for them to simply graze on my grass.
I know it’s not much, but I did also benefit from them keeping my grass short, and not having to pay $275 to bush hog it. Not to mention, I enjoyed watching them, they are gentle creatures and provided us with some ‘no-cost enjoyment’ while they were mowing my grass.
Want to be successful in investing in cattle? Follow these 3 ways to improve your chances.
There are some great benefits to raising cows, especially today, with the drastic increase in meat costs. As you may have guessed, the price of beef is up this year. As a result, so is the price for which you could be paid for your cattle, if you wanted to sell them for profit.
But, so is the cost of fertilizer, vaccinations, and supplements.
It’s rather difficult to get ahead in the ‘raising cow market’, I was simply a ‘hobbyist’ if you will. I believe the only way to generate significant profit form raising cows is to do this on a very large scale.
#3 Raising Chickens for meat
This option requires very little, as meat chickens are rather self sufficient. One could build a chicken tractor for under $100, as seen below:
Place the chicken tractor on your land with a few hundred chicken inside and they will eat, and eat, and when you think they’ve eaten enough, they will surprise you by eating more.
And a special Bonus…they also fertilize the grass!
Yes, poop has lots of fertilizer. If you could find a way to harvest chicken poop, you could make a killing, gardeners would pay big money for it.
There are 3 things you’ll need to be successful in raising chickens for meat.
- Make sure the meat chickens have fresh grass for vitamins, and insects for protein.
- Make sure they have fresh water to stay hydrated.
- Keep them under shelter so they can maintain adequate body temperatures, and it will also keep them safe from the roaming foxes, hawks, and un-domesticated dogs.
There will always be a market if you want to raise chickens for meat. Always! However, the market wont always be profitable. Things like a drought and the challenges it creates will inevitably make the profitability of raising chickens drop precipitously.
And, like we are experiencing today, the increase cost of food supplements will also impede the profitability of raising chickens for meat.
#4 Start a flower farm
Flower farms are all the rage right now, not only for the flowers they produce, but also the scenic backdrops they create for instagram feeds.
The profit margin on a flower farm can be immense, but make sure you don’t mind the dirt under your finger nails and that your body can sustain the constant bending over.
Here is a great post from profitableplants.com where Craig highlights the10 most profitable plants to grow. See here
Starting a flower farm, doesn’t take a significant amount of space either, in fact an acre or even a little less will likely suffice. The challenge will be maintaining the correct soil amendments, along with the the invasion of innocuous weeds and predatory insects, and of course a sufficient amount of hydration.
Bring your Fresh Cut Flowers to a Farmers Market and you’re sure to leave with a pocket full of notes with the faces of dead presidents on them, guaranteed!
#5 Start an RV Park
This is an option I’m considering right now. I live in an area of Tennessee which is close to a few lakes that happen to be covered-up with Large Mouth Bass, Croppy, and Catfish.
Its a fishing Mecca!
People want to be here, and they need a place to park their RV or they have a desire for a Short Term Rental (which there are very few options for).
Starting your own RV park needs to be a strategic decision, with a significant amount of market analysis done in order to be successful. Do things like:
Find out what the vacancy rate is at hotels and motels in the area you want to start an RV park in.
Find out what your competition is with other RV parks in the area.
Make phone calls to other RV parks to see what their vacancy rates are, and what their daily rate is.
Here is a great post on winnebago.com from Heath and Alyssa Padgett on their experience of starting an RV park.
Consider large infrastructure costs such as: septic, water, and electric, and how you’ll will make a return on your investment if you do provide these.
Starting an RV park can be very interesting, as you have an opportunity to meet people from all over the US, heck maybe even the world. The stories you’ll hear, the people you’ll meet, may make the headaches involved, all the more palatable. This is a Raw Land investment I am seriously considering making on my 16 acres.
So, if you have raw land, would you consider one of these options?
Jim started his real estate investing career in 2005 and enjoyed 3 good years before the Financial Crash of 2008. Jim’s been a steady equities investor for over 20 years, but really didn’t realize the power of dividends until 2015. Since then, he’s adopted an ‘if it doesn’t produce income, its not worth investing in” motto. Jim works in a sales and marketing position and has knowledge in SEO, Blog Writing, Website building, and growing a digital brand. If you’re looking to build your online presence, feel free to reach out to Jim.