Investing in Vacant Land: A Viable Option?

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When I first became a Realtor and I was taking several courses to get my Broker’s license, I remember learning about vacant land investing. One of the things they taught was the old rule of thumb is to never invest in vacant land if you weren’t going to build on it within 12 months. Now I’m sure many people may disagree with this idea but I do believe there is some merit to this statement.

You see, I actually broke this rule about ten years ago so I learned the hard way of course. I had purchased a piece of land in a vacation home community in upstate Pennsylvania in the Pocono Mountains. When I began I was looking at a pretty underdeveloped area (which was what I wanted) that a few friends and family members of mine also vacationed. I had found the lot available in a local newspaper and when I met with the seller, I was eager to buy. The guy selling me the lot said it had “perked” (meaning it passed a percolation test) but I did another test to verify for myself and I made it part of our own purchase agreement. A percolation test is to determine the absorption rate of soil for a septic drain field or “leach field.” This is a detail that is EXTREMELY important because if it didn’t perk, it would be just an unbuildable lot.

After closing on the plot of land, here’s where I made my mistake, I didn’t build my house until 6 years later. I was just too busy to do it. Naturally I ended up paying thousands of dollars in taxes and homeowner’s association dues for six years with no real benefit except for a little fishing and a nice plot of land to look at. So that’s what can happen when you break rule #1 when investing in vacant land. But hey, we all make mistakes and it’s better to learn from them and teach than sit and wallow.

Related: The Perfect Path to Developing Real Estate

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Advantages of Buying Vacant Land

Plus there are plenty of advantages to buying land as well, like:

  • Strategically buying and flipping the plot to another investor
  • Having the ability to sell portions of land after subdividing. This can be more profitable than just flipping the whole vacant lot
  • It can be a stable, long term conservative investment
  • Land is a tangible investment that can be more affordable than say developed land as far as taxes and all around maintenance
  • It can be developable for commercial or residential uses (e.g. investment property or build your own primary)
  • Can use for agricultural or farming uses

I once worked at a Christmas tree farm in college where a builder was using the trees to pay his taxes on the land until he was ready to develop or subdivide the piece later on for residential homes. It was a great short-term operation he could set up quickly and efficiently that fit his plot of land. I also knew a commercial Real Estate attorney who used to work with a major pharmacy chain that were looking to expand into multiple areas across the tri-state region. His strategy was to go tie up a commercial lot in one of these places and then approach the company about putting a pharmacy at his location. He made a very nice living with this strategy, which was buying on research and knowledge, not speculation.

Related: One of the Most Important Skills in Real Estate Investing

Disadvantages of Investing in Vacant Land

If you’re not buying with such a strategy in hand, there are some disadvantages to consider like:

  • NO immediate cash flow
  • Property taxes and/or association fees
  • Survey’s, septic and wells can be expensive
  • Vacant land can need maintenance and/or liability insurance.
  • Vacant land can drop in value
  • The area the lot is located could get worse
  • Permits and approvals can become more difficult in the future as ordinances and future political changes occur
  • Zoning restrictions
  • Long term investing strategy that isn’t always liquid
  • You can’t depreciate land

Now after discussing some of the pros and the cons, I hope this hasn’t left you scratching your head. Like mostly any Real Estate project, investing in land requires purpose, focus, and knowledge of what/where you’re buying. Buying on speculation is insanity to me. Know if you want to flip it, hold it, or keep it for yourself long before you buy it and never go in there without a “plan b.”

I’ve worked with several successful developers for many years, and they usually put larger land tracts under contract with many contingencies such as permit approvals for whatever it was they were trying to develop. So if they couldn’t get permits for what they were trying to build, they wouldn’t buy the land. If you do venture into vacant land investing just take into consideration the disadvantages stated above and try to mitigate the risks. Remember, the builder didn’t mind running a Christmas tree farm knowing he was going to have a huge profit once the land was finally developed!

Photo: SergioTudela

About Author

Dave Van Horn

Dave Van Horn is President at PPR The Note Co. - an operating entity that manages several funds that buy/sell/hold residential mortgages, both performing and delinquent. Dave has been in the Real Estate business for over 25 years, starting out as a Realtor and contractor and moving onto everything from fix and flips to Raising Private Money.


  1. If you plan on staying in real estate for the long haul, concentrate your efforts in niches that you like and enjoy: foreclosures, wholesales, short sales, fixer uppers, commercial, tax liens, probates, etc.This information is very useful for all those people who are planning to invest in various real estate properties

  2. Brian, I dunno, I hear that often, my vision is to be good at as many markets as I can so I can manage market changes better.

    Dave, great article. I’m looking at building a medical facility on developed land. Do you have any experience with that?

    • Terry,

      I’m in a Wellness Center package right now but it’s at a standstill since financing has dried up. We own the land, sewer, water, and roads are in place. We just need to lease or sell 60% of the Center before construction can continue.

      Do you need any advice on anything in particular?


      • Dave, I have a nurse as an investor, and will look for a Do, etc. Is there anything you can offer I should know about medical facilities such as red tape in building one on developed land? Are they a different animal as far as codes, location, demographics, etc? Wellness center sounds interesting, or “Urgent Care” I got the idea from California, no appointment needed, walk in and usually cheaper. Suburbs I am finding have no competition and dire needs.

        • Terry,

          As far as red tape goes, there’s nothing I can really think of especially if you’re zoned by the township to be a medical building. I would talk to the township and see what they have to say, the friendlier you become with them the better.

          Urgent Care shops are an interesting model too, best of luck to you.


        • Dave, do you put together investment “packages” for land development? I’m wondering because if I put the same package together for building a medical facility I then go find funding for it? Where would I advertise? Any tips on how to go about this? What needs to be in the package?

    • Terry,

      I focus mainly on working in notes investing more than commercial investments at the moment, but if you send me your email (you can message me personally if you’d like) I could give you a copy of our investment package to give you an idea of what one looks like. You can’t advertise to the general public, but you can start a private offering and market towards accredited investors.


  3. Great article Dave. I agree with all of your bullet points. I buy a lot of land but not truly vacant land. I invest in improved lots in subdivisions. I purchase 3 to 5 Lots at a time from banks and sell them one at a time at a 20-30% mark-up to small builders who cannot afford to buy several at once. I sometimes use hard money (borrowed against my home or a rental property) and Sometimes I use my own cash when available. Recently I used a self-directed IRA to purchase three lots and all three of them have sold to a local small builder on a 6 month take down schedule. I do not flip all the land I purchase. I am holding on to about 10 parcels in great areas and watching appreciation. I don’t enjoy writing checks for HOA fees and taxes while holding these but two of my properties in a rural area and make money with trailer, boat, and RV storage.

  4. I invest in vacant land for none of the reasons stated here.

    I’m developing mine as a permaculture/conservation/beautification project with a long hold horizon. I like knowing that the property reflects nicely on the value of my primary residence (nearby), but, get the most satisfaction knowing I’m improving its ecological value. Specifically: watershed protection, wildlife habitat, and food production (orchard).

    I wish more investors would consider at least one or more of these kinds of conservation parcels in their portfolios — the value is measured differently, but still valuable. Just a thought for those of you who want to try something new…

    • Katie,

      That’s a great point I overlooked. In fact I’m involved in a land conservation trust in our township, where we actually bought several pieces of land (over 210 acres so far). Many of the residents have participated in trying to maintain these grasslands and woodlands.

      This is a great investment in our environment and our future. Not to mention it also keeps land value up in the area!


  5. Terry,

    I focus mainly on working in notes investing more than commercial investments at the moment, but if you send me your email (you can message me personally if you’d like) I could give you a copy of our investment package to give you an idea of what one looks like. You can’t advertise to the general public, but you can start a private offering and market towards accredited investors.


  6. I just acquired 10 acres. I just want to flip it. Thoughts? It is zoned for residential building. I’m young. My step-father gave me the land. It is near the Colorado and New Mexico state line. Thoughts?

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