5 Ways to Make Money on Your Investment
September 6, 2022 in AFM News
If you're a new owner of land real estate, it can be challenging to navigate this unfamiliar terrain. At American Forest Management/AFM Real Estate, we understand that our clients need to produce a return from the investments they make in their property. Below are five ways to make money in land investments.
- Depending on the property, there are various opportunities for cash flow. Consider options like timber harvesting, agricultural rents or leases, hunting or recreational leases, grazing leases, mineral sales or leases, and conservation payments. Each option can give the landowner periodic cash flow and a return on their asset.
- Location, location, location! You have probably heard this saying regarding residential real estate, but it also applies to land real estate. Land real estate often increases in value and appreciates over time. There is a finite amount of land available for purchase, especially if the property is in a favorable location with solid attributes, like a variety of tree species, road frontage, utilities, and water features.
- If your property is forested, the value of the timber will increase over time as the trees develop into larger, more mature trees. Of course, it's hard to estimate the value of timber when there are so many factors to consider, i.e., soil quality, species, and the local market. However, our forestry professionals at American Forest Management are poised to help you determine the value of your forestland both now and in the future.
- One tax advantage in land real estate is the 1031 exchange. In its most basic form, a 1031 exchange is a tax deferral. If you have land used for business or investment, you can trade it for new land with the same intention. You avoid capital gains tax on the sale of the new property, thus allowing you to build more wealth. Our real estate agents at AFM Real Estate are ready to help. If you are interested in learning more about a 1031 exchange, read our article here.
- A seller was motivated, and you were able to purchase a property for less than it is worth. Perhaps you saw a diamond in the rough and were able to make some improvements and increase the property’s appeal. Not only is the property more desirable and marketable than when you purchased it, but you have captured unrealized equity early in your ownership period. Additionally, you could convert the property into higher and more valuable use; for example, purchasing a timberland property that could be utilized for homesites.
Do you want to learn more about your property’s potential? Reach out to AFM Real Estate and American Forest Management professionals for a consultation.