LAND IS A SAFE INVESTMENT
Purchasing a parcel of cheap rural property for a long term investment, can be one of the surest and safest methods of preserving capital and increasing assets. Investing in low-cost cheap rural property, located in the “middle of nowhere,” is an overlooked and seldom understood real estate niche that can produce substantial profits.
Most real estate investment advisors ignore cheap rural property because these properties are usually far from major cities. Real estate advisors have been taught, and believe, that the most important factors regarding land investment are “location, location, location.” However, investors who deal in cheap rural property would disagree. They would say the most important factors are “price, price, price.”
Early in 2007, some of the brightest real estate consultants in the nation advised CalPERS, the State of California’s multimillion dollar public employees’ union retirement fund, to invest in 15,000 acres located a few miles north of Los Angeles. The land was appraised for $2 billion, and the location – practically bordering America’s second largest city – couldn’t have been better. The real estate “experts” who put the deal together would have laughed at the idea of investing in cheap rural property for $400 to $500 per acre, preferring instead land near a huge population center priced at $140,000 per acre.
Soon thereafter the housing market collapsed in California, and within three years, CalPERS lost almost $1 billion, as the appraised value declined more than 50%, to around $60,000 per acre. So obviously, the old adage of “location, location, location” didn’t prove correct in this situation.
How did cheap rural land located in the “boondocks,” priced under $500 per acre, hold up over the same period? Even though the United States’ economy was going through a serious financial recession, land priced under $500 per acre remained fairly stable. Certainly, no case can be found showing that such properties dropped in value 50%. If anything, in some cases, prices have increase 50%.
The great thing about cheap rural property is that no population growth, no development and no rezoning is required to cause the land to increase in value. All that is needed is the passage of time and inevitable inflation! History has proven that if a person acquires a large parcel of low-cost cheap rural property and holds it for a reasonable period of time, it is virtually impossible to lose money. In other words, the most important factors in long-term, cheap rural property land investment are “price, price, price.”