The recent pandemic has shown that location doesn’t matter as much as it used to. Many workers now have the flexibility to work remotely from anywhere there is an internet connection. Now, more than ever, workers can look for available home options never before possible because of affordability and commuting distance.
This new reality allows people to now have the freedom to live where they want and no longer worry about the daily commute. For many, this includes the option of moving away from urban areas filled with smog and congestion and back to small towns where life moves at a slower pace. Families are looking for good schools in quiet neighborhoods and with many occupations seeing increased wages, building a home and living the American dream is entirely possible.
If you’ve considered selling your land but weren’t sure of the timing, the reasons mentioned above and the ones we’ll mention below will show you why there’s no time like the present.
Here are five reasons to sell your land now and take advantage of a fantastic real estate market.
1.You’ll save in the long run.
Let’s look back on one of many lessons you likely learned when you purchased your first home: ownership is not free! Never mind the cost of ownership when you’re paying down a mortgage with interest; even if you own your home outright, there’s still a hard cost involved with ownership—and it’s significant enough to slowly chip away at your bank account, if you let it.
Aside from annual property taxes, there will always be the need for maintenance and upkeep … and circumstances for which you simply cannot plan. It’s one thing to continue shelling out for these expenses if the math adds up and there’s a proper return on investment—like having a great place in which to actually live, or income from renters. But getting “nickled and dimed” for a stagnant investment is quite another.
Why would you want to drain your pockets slowly, when you could cash out big?
2. How Strong is the Real Estate Market?
The demand for real estate will stay strong nationally as the country continues to recover from the pandemic. Many workers who lost their jobs or were forced to close businesses can now seek opportunities elsewhere. Across the country, rental prices continue to rise and in many communities, not only is it challenging to find an affordable apartment or home to rent, it’s almost impossible to find anything to rent as many towns suffer from housing shortages.
As the shift continues away from urban areas and into rural settings, buyers are looking for ways to have a home while having a smaller carbon footprint. In addition, the price of lumber and the scarcity of other essential building supplies have shifted the way many think about the home-buying process.
The great thing about owning vacant land is the opportunity to do what you want with it, or at least what’s allowed by local ordinances. With rental prices so high, tiny homes, recreational vehicles, and other manufactured structures are now a viable option. With the purchase of a small plot of land buyers can have the foundation to live the life they desire while still being connected to the outside world.
3. Have Your Plans Changed?
It happens more often than most people think: a client inherits Land from a relative or even a close family member, and they stall on taking any action, hesitant to liquidate an asset that holds sentimental value. The question is, where’s the sentimental value in a vacant lot? Or maybe you purchase property with the intent to build a retirement home or to use it for recreational purposes, and your plans have changed due to economic hardship or other personal reasons?
While some try to plan out every aspect of their future, life sometimes takes a turn and heads in a totally different direction. If your life plans have changed and you find yourself no longer needing the land you inherited or purchased, Selling the property will not only enable you to build wealth by liquidating the asset and avoiding the cost of ownership we previously brought up—it will also allow another family to fill it with the next phase of love and happy memories.
4. Are the Taxes or Dues Too High?
As the nation faces record consumer prices and inflation, many local towns and communities struggle to keep up by raising taxes. In addition, as the shift continues to work from home, many heavily taxed states like California and New York are losing residents as they relocate to states with better tax rates.
Another reason why now might be a good time to sell your land is that the HOA fees or membership dues required to own property in certain developments have gone up or are just unreasonable.
If you bought your land at a low price and it has increased significantly in value, you could save money on your taxes by selling it now. The capital gains tax is a tax on the profit made from a non-inventory asset. In simpler terms, the difference between the purchase price and the selling price of your land is considered profit, and you’ll have to pay taxes on it in most cases. Alternatively, if you overpaid for your property and ended up selling it for a loss, you can use that capital loss to offset any capital gains.
Although selling at a lower price might not make sense, the tax benefits outweigh the lower selling price to some with complicated investment portfolios. Of course, consulting with a tax professional is the best way to know if this applies to your situation or not.
5. Time is of the essence.
This one’s a bit complicated, but it’s important to keep in mind that, for a number of reasons, it’s typically better the sooner your sell. Unless you’re making regular investments in the maintenance and upkeep of your property (which is problematic in itself, as previously touched upon), chances are that your vacant home is at least a bit of a fixer-upper.
Think about it—how often do maintenance issues arise in your primary residence? With what frequency do you invest in regularly scheduled upkeep, like cleaning and gardening? And if you ignored all of these, how quickly would your current home fall into despair? The longer you let your pipes go untouched, allow your landscaping to grow unkempt, and sit back as time takes its inevitable toll on the home, the more effort (not to mention, hard-earned money) you’ll eventually need to put forth if you’d like to sell in the future.
Just as problematic is the fact that vacant properties are at risk for issues like theft, vandalism, water damage, fire, squatters, and more.
6. Mortgage Rates are the Lowest in History
If you have a good credit score, then applying for a mortgage right now is the first step in the home-buying process. With a vacant land purchase, you have the opportunity to design and build your home while paying thousands less in interest than those who pursued the same dream in the early 2000s.
Before the housing bubble burst in 2008, the average annual percentage rate for a 30-year fixed mortgage rate was above six percent. By comparison, the same 30-year fixed mortgage rate in today’s market is less than 3.5 percent. Over the life of the loan, this equates to paying over $145,000 more in interest on a $250,000 mortgage.
While mortgage rates are generally higher for land-only purchases, they are still lower than previous years. To qualify for a loan on vacant real estate, buyers will typically have to have a larger down payment. Mortgage companies will consider your intentions with the property–whether for recreational purposes or to build a home–and will often base your rate on that.
As a seller, one option to keep in mind is owner-financing with a land contract. If you have found it challenging to attract the right buyers, owner-financing can be an attractive selling point and increases the odds of selling your land quickly.
7. Having tenants is a job in and of itself.
The prospect of renting certainly has its appeal if you don’t give it much thought beyond the money it could potentially bring in. What’s not to like about the notion of making money passively each month, especially in light of current economic conditions, in which rents in the state of California continue to steadily rise? Well, it turns out, there’s actually a lot to consider for prospective landlords.
If you think you’ll just sit back and watch money come in without doing any work … think again! Plan to spend a great deal of money and time making necessary fixes to the property, finding and retaining the right tenants, and to be “on call” when things (leaks, electrical issues, etc.) go awry.
Of course you could pay a property manager to handle all of that, if you’re willing to cut your ROI down even further … or, you could simply sell and keep your sanity intact while ensuring the highest, timeliest return.
8. Low Inventory
Vacant land is a limited commodity. There’s only so much of it, and it doesn’t matter if you’re looking to buy or sell because today’s favorable economic climate is good for business. Low-interest rates mean new homebuyers can build their dream home with affordable terms, and landowners looking to sell can get record prices for the land they no longer want or need.
5. You stand to profit!
We saved the best for last, and that’s the positive impact on your bottom line that selling promptly is likely to make. Right now, we’re experiencing a seller’s market, which means that inventory is scarce and buyer demand is high. Those with property to sell hold all the leverage—list your property now and you just might attract multiple competing cash offers. If you wait a while, it’s difficult to say whether such will remain the case, or to predict how much longer the conditions will favor you to the extent they currently do. Why wait? Selling a home is actually a smooth, pleasant experience when you work with an experienced real estate agent with a proven ability to get the job done.
If you need an experienced real estate agent who will make selling your home easy and who will ensure you get the highest possible value in the process, you’ve come to the right place. Reach out and we’ll connect you with an agent so you can get started today, and ensure that you’re making the most prudent financial moves for your future.