Land can be an easy low risk way to diversify a portfolio or to get started in investing when you do not have much cash or ability to acquire financing.
Three years ago, one of our contractors asked us if we had ideas of what he could do with $20,000.I told him, buy a lot. If he had listened, he would have doubled his money. I remind him every time he cries to me about money.
Most investors are understandably focused on properties that cash flow and overlook the value of owning some land in their portfolio. And wannabe investors who struggle to save enough to buy in cash or are not eligible for financing may not realize that land could be an interesting way to get started in real estate.
So how much can land appreciate in Philadelphia? The sky is the limit. Invest in neighborhoods that are appreciating, pay very close attention to zoning and lot size and look at what is planned for your block and the surrounding area – you can find concrete signs of planned development in the media, licensing and zoning records, real estate investment meetings, etc.
In the summer of 2018 we paid $25,000 for an RM1 lot. On the same block, there was already a rehabbed property adjacent to ours.
Annual holding costs are about $1,000 (insurance, taxes, licenses, water, maintaining grass).
Value of the lot is currently about $60,000 based on recent comps. A large group of lots at 2301 N 8th st, 2 blocks over, was listed for $600,000 and just went under contract with closing laterthis summer. Once the development plans for that will be made available, it will likely have a significant impact on all property values in the vicinity.