Can Land Flipping Reduce Your Financial Investment Risk?

Photo by Lukas from Pexels.

Reality TV shows highlight the high-risk, high-reward world of house flippers. These made-for-television dramas follow seemingly everyday people through challenges such as finding mold behind walls. In the end, they either ramp up their investment and turn a profit or lose it all.

The prospect of losing often deters would-be flippers from rolling the dice on what might evolve into a lucrative business. The solution some turn to involves purchasing land to minimize risk and turn a profit. Land flipping can deliver a high reward with less financial risk.

What is Land Flipping?

The practice of land flipping mirrors that of house flipping. You purchase a parcel of land substantially below market value, often 5-35%. The goal is to resell the property at between 50-80% of its estimated value. After subtracting fees, land flippers can turn a tidy profit with limited risk and effort.  

Like any enterprise, land flippers must have a thorough knowledge of the sale and purchase process. They must also have a knack for spotting a good deal and the ability to calculate the return on investment benefits accurately.

How To Buy & Sell Land For Profit

The internet makes finding land and conducting due diligence increasingly easy. Buyers and sellers can peruse real estate platforms for parcels that fall into your initial budget. Many listings provide a property value history that can indicate whether the tract’s value is on the rise or decline. You can also set search parameters for properties that have been reduced. Familiarity with online resources ranks among the top skills land-flippers should develop.

Successful land deals typically require taking a hands-on approach once you have narrowed the possibilities. Consider the following initial due diligence before making the purchase.

• Walk the Land: Examine the tract and search for things that could negatively impact resale values. This may include unfilled wells, pipes sticking up that indicate underground tanks and pest infestations such as active termites in rotting wood. Check the land for standing water that could indicate poor soil filtration. Also, does the tract have a raised area suitable for building?
• Water, Sewer, Power: Parcels outside city limits may not have access to municipal utilities and services. If this is the case, consider speaking with abutters about well water quality, septic systems and the cost of running power or viable solar options. These will impact your ability to sell to a potential home builder or contractor.
• Zoning: Check both the zoning regulations and building codes. The first will tell you what type of structure can be built. The second will provide insight into future building costs. For example, places that require elevated foundations may make it more expensive to build and the land less valuable.

If you are satisfied that nothing will significantly impede up-selling the land, consider brokering a deal. Prompt cash payments often help land buyers to negotiate a reduced price. This holds particularly true when a parcel lingers on the market.

How To Make Your Land More Valuable

After the closing, don’t hesitate to list the parcel at a price that delivers a quick return on investment. Flipping land is all about moving it quickly and pocketing a profit. That being said, you can improve a property’s perceived value by getting a dumpster, raking leaves, and tossing any debris into it. Real estate professionals typically call this “curbside appeal.”

The next steps usually include bulldozing a space to build. This move attracts contractors and people looking to build a new home. By now listing the property as a “buildable lot,” you have effectively increased its value.

Although every property presents unique challenges, the land flipping process remains relatively the same. Conduct your research, due diligence, and buy land below market value, often with the help of an agent. Tidy it up, remarket it and sell it closer to true market value.