Considering Your Retirement Options - Land Investments

If you’re preparing for your future, you need to look into retirement options. While I will be talking about land investments, I do recommend contributing to your 401(k), your 403(b), or an IRA. Why? These investment options are tax-deductible or tax-deferred, so it's smart to max them out when you have the opportunity. But, these aren't the only investment products that you should be investing in.

What many people fail to recognize is that a diverse portfolio is the best option for your retirement. You want to invest in something that is long-term and secure. And, I want to emphasize that long-term is the best option when investing in land.

If you’re nearing retirement, I recommend choosing an investment product that has the potential for high growth in the coming years. You’ll want to take an aggressive approach if you’re just starting to save for retirement and you’re in your 50s or 60s. But, if you’re in your early 40s or even mid 40s or younger, maybe even in your very early 50s, land could be a great investment that will provide you with a great return for your retirement.

Investing In Land

Investors consider land a high risk investment because it does not have a high liquidity. What this means is that it may take some time, months in most cases, to sell the land and to make a profit off of it. But land has provided many people with a very comfortable retirement.

A good example of this is when land in California was very cheap in the 70s, but now that land has appreciated in value well beyond with the stock market or traditional IRA could offer. This is due to a smart purchasing decision in an area where growth is certain. This is the trick to investing in land for your retirement. You need to choose land based on two factors:

* The land must appreciate in value and be sold off to make money.
* The land must generate income itself either through development or resources.

You also need to consider the property taxes that will be assessed on the land. When there is no structure on the property, you won’t have to pay high fees for property tax in most states. Obviously, this depends on the amount of acreage that you own. If you own several properties and are required to pay property tax on each piece of land, costs can quickly add up and actually harm your retirement funds.

Land Investments with a Purpose

Every investment must have a purpose. When you invest in stocks, for example, you invest knowing that there is a chance the company’s stock will rise in value. With land, there is a higher risk because you don’t know what the future holds for a particular area. California is a great example of an area with immense growth, but Detroit is an area that has seen a major decline. Your best opportunity, and the safest, is to invest in land with a purpose.

What does this mean?

This means that you want to have a plan to make money off of your land. When talking about your retirement, you don’t want to risk the appreciation value of the land being too low to be profitable. Again, we’ve seen people that have purchased land and sold it for 30 or 40 times its purchased value.

Land Considerations

What I’ve said so far has probably confused you. The right land can make a fortune that will last for hundreds of years. Wealthy individuals have been purchasing land for cheap and becoming rich as a result.

The trick is to choose land that is:

* On the border of an area experiencing economic growth and expansion.

* Zoned appropriately, whether it be commercially or residential, for the area.

* Priced well under value compared to surrounding land.

* Land that is a already equipped for building is ideal.

There is never a 100% guarantee that economic growth will occur in the area that you buy land. So, I recommend having the land work for you. This is definitely more hands-on than what some retirees will want to consider, but it works in many ways to make money.

Buy land with an understanding of what you would like to do with the property. Would you like to:

1. Let the land appreciate on its own and sell it?

2. Plant trees and use the land for timber?

3. Build a structure on the property and rent it out?

4. Lease the land for profit?

If you choose the first option, you’re at the mercy of the market with the potential that you won’t make money off of your investment. But, any of the other three options are great for making money now and in the future.

For example, a second option requires that you plant trees and allow them to mature for 5 to 10 years. An investor recently purchased 4 acres of land in Alabama and he quickly planted timber trees on the property. Within five years, he will be able to sell this timber for $30,000. Not only will this pay for his property taxes for decades, but the land's value will appreciate over this time.

If you have the money to build a structure on the land, you can choose to:

* Build a home and rent it out.

* Build a home and sell it.

* Build a commercial building and rent out units.

All of these options are costly, but they will provide immediate cash, and will provide you with the best return on your investment. Real estate appreciates at 5% to 10% annually. This means that an investment today will be worth 50% to 100% more in just a decade. A person lucky enough to pursue this option at a young age may see their investment increase 300% to 400% before retirement.

If you don’t want to build on the property, you can lease the land to somebody else and will still be making a profit and allowing the land to appreciate in value over time.