Buying Land

Recreational Rural Lake Lots as Land Investments

Recreational Rural Lake Lots as Land Investments

Retiring to the lake and enjoying the views.  Sounds great doesn’t it?   Some people have a dream to own some land in a recreational type community and eventually retire and build a home on the property.  It sounds wonderful and many parcels of land are available at what seem to be bargain prices in some of these rural areas.  However, buyer beware is definitely something to remember when evaluating these types of properties.

Over the last ten years or so there has been a huge influx of land companies that sell lots online at eBay or other auction websites.  They are advertised as foreclosures, bargains or cheap land all over the internet. As a land broker when traveling I always check some of the land prices out in recreational lake areas and many are nice properties but some are literally worth nothing. Utilities and road conditions are the major factors that have either justified or not justified the pricing on a rural recreational lot for sale.  Once we tried to find a lot in Colorado only to find out it was the side of a cliff with no access.  No matter how cheap that land was it would have been impossible to resell it unless maybe just giving it to the adjoining land owner. The current seller had bought the parcel sight unseen over the internet and was asking several thousand dollars for the parcel. It never sold and eventually the county took the property in tax foreclosure for non-payment of property taxes.

Buying land as an investment tool is probably a good idea in an overall sense but just buying land sight unseen because it is cheap is a recipe for disaster. We have had many clients over the years contact us to help them sell off lots they bought years ago and the lot ends up being worth less than they paid for them twenty years ago.  They bought on marketing pressure or the belief that the area would grow and more lots would be sold.  Unfortunately, most of these properties were so remote initially that the growth had no chance of ever reaching the area.

So how do you know if a rural recreational lot that you are considering is worth it? Worth in terms of recreational value has no right answer.  First, determine your reason for owning it.  Are you truly thinking of building on the lot someday or do you want to use the lot as a vacation spot for camping while on vacation?  Or are you just buying it because it is cheap?  Consider all the facts and determine when and what your exit strategy will be for selling the recreational lake lot. If the family time and enjoyment of the land is worth it then by all means consider the purchase if you think you will truly use the land at some point in the future.  However, more often than not we hear of good intentions of building on it or vacationing in the area but later the buyer realizes the location is too far or they are just not using it and decide to sell.

Homeowners association, subdivision fees and assessments are some major cost factors that you need to consider when purchasing a recreational lot.  Many times the fees are several hundred dollars a month on top of the real estate taxes and it can end up costing you thousands per year just to own the parcel.  On the flip side, some places have minimal fees and low tax rates.  We have a client that owns several lots in various places that have no fees, no building requirements and very low taxes. Each year on their hunting trip they park their camper on the lot for about a week.  For approximately the cost of one night’s hotel per year in taxes the land pays for itself each year.  They can stay on their land and not have to worry about finding a place that will accept pets for their hunting dogs.  As mentioned before, worth or value in terms of recreational use has no set value because it is different for everyone.

So if you do end up with a recreational land lot that you are not using and the costs are more than any annual appreciation you might consider selling.  Contact a land agent in the area and get information on actual sold values to determine your price range.  Be prepared to get low ball offers and be even more prepared to seriously consider them because the market for recreational lots is still extremely flat.

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LANDTHINK

LANDTHINK is part of the LANDFLIP family of sites and brings together the various components of the land industry and provides knowledge and information to land investors, owners and professionals to create a stronger land marketplace. Get land smart!

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  • Rural recreational land especially on the lake or in the mountains still can be a fantastic investment if you do your homework. Buying in the biind without contacting a local real estate professional about comparable sales will prevent you from fully getting the best sale price. Learning about local laws, zoning and utilities will allow you to make a wise investment rather than a risky gamble. Too many people just buy because of developer sales or cheap internet sales and do not understand all of the fine points of rural recreational properties that have value and those that do not. Knowing the difference between good property and bad property is the difference between the ones that have the same or less value 20 years later and the ones that are worth much much more in decades to come. Using a skilled REALTOR makes a big difference in your purchase.

  • Janelle..thank you for your comments especially great point to do the homework that is what makes all the difference.

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