Investing in Unimproved Land and Improved Land

You can invest in real estate through buying lands or improved lands.

The unimproved land is its natural state with no improvement, which does not generate incomes. The unimproved land is bought either to develop it (improve) or to keep in case a potential increase in the appreciation of capital.

The disadvantages at investing in unimproved land are the following:

  • The unimproved land pays taxes to the state and in some cases to local governments.
  • The investment could not be liquid or negotiable, it could take time to try to sell the unimproved land, and the price would have to appreciate considerably to cover the real estate commissions. Legal fees, and any other fees in which one could incur when buying or selling the land.

Consequently, any appreciation of unimproved land would have to be higher than the total costs incurred to buy it, keep it, and later sell it in order to get a profit. The improved land includes improvement of the property such as curbs and gutters, and could be classified in different types:

  • Residential which owns family homes or multifamily
  • Commercial which includes shopping centers, stores, theaters, hostels, office space and parking lots.
  • Industrial which includes warehouses, industrial districts and factories
  • Special-purpose properties that include schools, cemeteries, churches, and government held lands
  • Agricultural land that includes farms, ranches, timberland, and orchards.

Each one of these real estate markets has different characteristics that determine real estate prices.

Investing in these markets requires specialized knowledge about geography and improvement of land (zoning and other land-use laws) and an analysis of negotiation about improvements (for income-producing properties).