Parceling Raw Land for Maximum Profits

While we, as real estate investors, generally think of purchasing developed land for investment, there is an entire other sector of the business which is worth exploration – raw land. Are you aware of the fact that approximately 85% of the land in the United States is still in its raw and undeveloped form? Think about that statistic for a moment, this means that there are huge amounts of land which you can invest in.

Land can be purchased inexpensively compared to developed properties. And, large chunks of land can be purchased and then subdivided to further increase your profit margin. Let’s take a moment and see how that works.

Let’s look at something simple like a pie. You go into a restaurant and order a slice of pie for desert. Generally you will pay about $3 for your slice of the pie. Assuming the pie has 10 slices, the restaurant sells the pie by the slice for a total of $30. However, if you were to purchase the entire pie to take home, as many restaurants will let you do, the cost is less, maybe about $15.

Using the pie as an analogy, suppose you were to purchase a large parcel of land of 1000 acres for the price of $100,000. Now assume that you were to subdivide up that large parcel of land into 10 parcels of 100 acres each, assuming the local planning department allows it to be done, and then sell off those “slices” of land to those people in the market for land. Knowing that there are many more people interested in smaller portions of land than larger ones, you can then charge a higher price for your smaller parcels. For instance, you could charge $20,000 per 100 acre parcel. If you do this, and you sell all of your 10 parcels, you have just made a $100,000 profit!

While there are profits to be made in developed real estate, there are equally, or even more profits, to be made in raw land. And the best part is that when you are dealing with raw land you do not have to deal with defects that come with homes and other structures.

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