Can you retire in five years from raw land? The answer is not a simple yes or no.
The reality of land acquisition is as vast and varied as land itself.
However, it is still a growing market that has witnessed heaps of growth, clearly confirming that raw land is an option that more and more people are willing to explore.
In 2022, the market grew to $168.48 billion. In 2023 that figure increased to $185.22 billion, and it continues to climb. At this rate, the market is expected to skyrocket to $266.9 billion by 2027.
This massive growth is a testament to the lucrative potential and investment opportunity land represents.
So… Can you really retire in just five years?
The truth is that it depends on a myriad of factors from location to development potential and your ability to navigate the nuances of this niche industry.
Yet, with strategic planning and understanding of the market – which this blog will provide you with – raw land can be your ticket to a golden parachute retirement.
Key Factors to Consider:
- High Returns: Unlike traditional real estate wholesaling, which requires numerous deals to accumulate wealth, raw land with development potential can offer significant returns from a single transaction..
- Limited Capital and Risk: VestRight’s own, Eric, made around eight million dollars on one deal, demonstrating the substantial amounts which can be made with minimal capital and risk.
- Not a Get-Rich-Quick Scheme: While this is a business model that has huge potential, earning big paydays necessitates a willingness to learn, adapt, and grind.
- Off-Market Prospecting: In our mentorship, Vestright emphasizes the importance of off-market prospecting. This involves finding, analyzing, and negotiating deals directly with property owners rather than relying on brokers or listings.
The Process of Land Development
- Identifying a Property: Understanding the criteria for development potential is essential. This involves market analysis and outreach to property owners through direct mail or cold calls.
- Getting Under Contract: Once a willing seller is identified, the property is put under contract.
- Feasibility Period: A 90 to 120-day evaluation period to analyze the land, understand its potential value, and ensure it meets the required criteria.
- Land Use Approval: Following feasibility, the land goes through a 90 to 180-day process to receive necessary approvals and permits for development.
- Exiting the Deal: Land Agents typically exit at various points of the entitlement process, transferring ownership of the existing project deliverables to the construction companies.
- Civil Engineering Approval: An additional step involving civil engineering or construction drawing approval, while not always required, can add 3-6 months to your project schedule.
- Lack of Education: Many make mistakes due to the limited education available in this space. This is a growing market, which means growing profit, potential, and demand. As a result, you want to make sure you know raw land better than you can count.
- Misunderstanding Construction: While deep construction knowledge is not essential, understanding basic concepts and working with a good civil engineer is crucial for on-time project completion and success.
Raw Land Versus Development Potential:
The reality is that raw land by itself might not be the golden ticket to wealth, particularly for those aiming for quick returns. Although raw land typically appreciates over time, it usually does so slowly and unpredictably. Without a clear understanding of its potential, a raw land deal may remain stagnant for years, or even decades.
Development potential, on the other hand, is the hidden gem within the raw land that can lead to substantial profits. Land with development potential is suitable for building commercial or residential properties, infrastructure, recreational facilities, or other valuable improvements.
The goal is to see beyond the bare land and visualize what it could become.
Whether that's a bustling commercial center, a residential neighborhood, or a recreational park, the key is to align the land's potential with the demands and needs of the surrounding community.
In the video below, we offer a comprehensive deep dive into the most common steps of this process.
These might include:
Location: Proximity to thriving communities, commercial centers, or scenic views can enhance the value of the land.
Topography: The physical characteristics of the land, including soil quality, elevation, and drainage, impact its buildability.
Zoning Laws and Regulations: Understanding local zoning laws ensures that the land can be used for the intended purpose.
Access to Utilities: Availability of water, electricity, sewage, and other essential services is vital for development.
Market Demand: Recognizing what type of development is in demand in the area, be it housing, commercial spaces, or recreational facilities, is crucial.
Acquiring raw land with development potential isn't merely about buying and selling dirt; it's about identifying the opportunity hidden within that dirt.
By recognizing the potential for growth and the possibilities for improvement, allows you to multiply the land's value many times over.
By keeping a keen eye on the development potential of the dirt you’re investing in, retiring from land will be a breeze. Especially since you’re developing your piece to give you the most profit.
It's an art and a science, blending intuition with analysis and vision with pragmatism. In the world of raw land, seeing the invisible potential makes all the difference.
Now that we’ve established how to look for the potential, next is to determine what strategy will get you the most profit possible.
Buy and Hold Strategies in Raw Land Acquisition:
Buy and hold is a long-term strategy that involves purchasing an asset and holding it for an extended period, regardless of market volatility.
This can easily be applied by buying land with development potential and holding it as it appreciates in value over time.
While there are models that primarily focus on active income with high multiples, meaning quicker returns and more significant profits. It's about patience, foresight, and a vision for the long-term potential of the land.
These are factors to consider when it comes to applying a buy-and-hold strategy for raw land:
1. Identify Long-term Growth Areas: Look for regions that are likely to experience economic and population growth over the coming decades. These areas may offer raw land at reasonable prices today, with substantial appreciation potential over time.
2. Understand Zoning and Regulations: Familiarize yourself with the local zoning laws and regulations to ensure the land you are investing in can be developed in the future, aligning with your long-term vision.
3. Evaluate the Land's Potential: Assess the land's topography, access to utilities, and other factors that could influence its future development potential. The goal is to find land that may not be ready for development now but has the potential for growth in the future.
4. Secure Financing if Necessary: Long-term holding might require stable financing. Research your options for land loans or other financing methods that align with your timeline.
5. Monitor Market Trends: Keep an eye on market trends and the overall economic environment in the region. Understanding how these factors may impact your investment can help you make informed decisions about when to hold and when to sell.
6. Consider Taxes and Other Costs: Holding land long-term will have associated costs, such as property taxes and possibly maintenance. Be sure to factor these into your plan.
7. Roll Equity into Long-term Holdings: As you succeed in other investments, you can take that capital and reinvest it into more long-term holdings, building a diverse portfolio of land deals.
This is a strategy that offers a way to build wealth over time, taking advantage of gradual appreciation rather than quick flips.
It can be a more stable and less labor-intensive approach, particularly if you're aligning your investments with broader economic and demographic trends.
It's also a strategy that can complement more active models like Cody's.
While you may engage in quicker deals to generate immediate income, having a portion of your portfolio in long-term holdings can provide financial stability and growth potential.
Especially since it’s about seeing the slow and steady potential within the dirt.
It requires a different mindset from the fast-paced world of flipping and active income but offers its own unique rewards.
Aligning your strategy with long-term trends, and patiently nurturing your deals, you can create a foundation for sustained wealth and financial security.
And ultimately retire from it.
Tips for Success in Raw Land Acquisition:
The landscape of raw land acquisition is filled with potential for significant profits, but it's essential to understand how to navigate this unique field effectively.
1. Find a Mentor
One who’s experienced the highs and lows of raw land can provide insights, wisdom, and advice that can be instrumental in shaping a successful journey. Seek out someone who has a proven track record in raw land. They should have the ability to share practical knowledge, provide constructive feedback, and assist in strategizing based on current market conditions.
2. Stay Informed: The Importance of Continuous Education
Raw land is governed by numerous factors, including local laws, market trends, and economic conditions. Regularly enroll in courses and workshops that cover various aspects of raw land. Attend industry events and network with other professionals. Regularly read industry reports, journals, and news to stay up to date with the latest developments.
3. Stay Committed: The Need for Consistency and Determination
Like any investment, raw land demands a commitment to a clear vision and goals. Consistency in effort, determination in the face of obstacles, and adherence to a well-planned strategy are essential to achieving success. Know what you want to achieve and set both short-term and long-term goals. A well-thought-out plan will guide your journey, helping you stay on track and focused.
Success in raw land doesn't come by chance. It requires a strategic approach, guided by the wisdom of a mentor, underpinned by continuous learning, and driven by unwavering commitment.
Raw land offers an undiscovered world of opportunity.
It's not just for the elite but for anyone willing to learn and embrace a new business model.
If you're seeking financial freedom and willing to get your hands dirty, the world of raw land might just be your next venture.
For those who wish to retire within a short time frame, understanding the intricacies of this business model and aligning it with personal retirement goals is essential.
While it might not be a path to quick billionaire status, achieving millionaire status in five years is a tangible reality for many.
Raw land is more than just dirt; it's a ground-floor opportunity and might be one of the most profitable and least understood strategies in real estate.
While there are countless resources for traditional real estate, raw land remains a hidden gem, and the VestRight team is here to give you access to just that.
Happy digging, and yes, washing your hands afterward is still a good idea!
Click here to book your first call with the team today.