Mike Kobeissi has given real estate investors thoughtful advice over the years and helped many buyers and sellers make great money. For example, he recently discussed the importance of buying raw or undeveloped land and when this investment is the best option for you. Understanding these unique investment opportunities is a great way to advance your real estate career.
Mike Kobeissi: When Raw Land is Right for Your Investment Profile
If you’ve never purchased raw land, knowing exactly what it is before investment is important. Real estate developers like Kobeissi define it as land that has yet to be developed or prepared for construction. This type of land is increasingly rare in urban areas but common in more rural spots, such as near farms, outside smaller cities, and even on the fringes of some suburban areas.
Is buying this type of land an excellent investment? Yes, depending on the situation. For instance, a savvy investor can buy inexpensive raw land, grade it properly, and install an affordable commercial property there. They can then sell it at a higher rate to developers who don’t want to do the hard work themselves. In this way, developing raw land is like flipping a home.
In this way, raw land development is a long-term strategy. Mike Kobeissi doesn’t suggest it for investors who want a quick payout. Instead, you will look to develop the land into an attractive purchase. Typically, raw land has a high level of appreciation, particularly in areas where developed properties are increasingly rare. Holding onto raw land instead of developing it may work well in these situations.
That’s because the value will only increase as undeveloped land becomes harder to find. Note that raw land loans are usually much shorter than developed properties, including terms of about ten years or so. As a result, it is essential to buy at the right time, including when an area is on the economic rebound. That raw land will become very appealing to investors quickly as more businesses move into a region.
Lastly, Mike Kobeissi states that raw land is an excellent investment in areas getting urban renewal money. For example, many vacant lots and abandoned buildings in urban areas may be much like raw land. During extensive and effective renewal projects in heavily affected urban areas, you’ll need to destroy these old buildings and reinvent them with better facilities.
These properties are often inexpensive just before these projects and can sell incredibly well once a project begins. Cities typically try to buy them up before making significant changes, so pay attention to real estate exchanges in these economically devastated areas. It could indicate a major renewal project you can take advantage of before the city buys all the properties. Doing so can help you turn a quick profit once the development project begins.
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