"Why, land is the only thing in the world worth workin’ for, worth fightin’ for, worth dyin’ for, because it’s the only thing that lasts." – Gerald O’Hara, Gone with the Wind
Land – it’s one of only a few assets that holds value and appreciates over time. And while your investment grows, you can enjoy its benefits. Have you ever tried hunting, fishing or hiking on a stock certificate? The question isn’t, "SHOULD I buy land?" The real question is, "HOW do I buy land?"
Paying cash for raw land is a great way to be competitive with your offer and save money in the long-term. An all-cash purchase certainly has its benefits – a quick closing, a seller more likely to accept your offer, and you don’t have to wait on appraisers, attorneys, lenders, etc. Plus, you will own the land free and clear.
However, even if you have cash on hand to make the urchase, is that always the best idea? Here are three reasons why you should consider using financing:
- CASH IS KING – Maintain your liquidity - Purchasing land requires a HUGE capital investment. Once the cash is spent, you lose your ability to act quickly on future needs and investment opportunities. Liquidity is how quickly your assets can be converted to cash. Stocks and bonds can be sold quickly to generate cash: land is not as easy to liquidate in a hurry.
- Strike when the iron is hot – Conserve your buying power - What is your goal? If this is it – the only tract you will ever buy and you know it – using more cash could be the best option. However, if you are interested in purchasing additional tracts, consider financing to maintain liquidity. Land doesn’t sell often, so when it does you want to be ready to buy. The best way to invest wisely is to have the cash you need to pull the trigger quickly. Without liquidity, you could miss out on a good investment.
- Feather your nest - Save cash for improvements - If your plan is to build a cabin, barn, pond or make other significant improvements on the land after your purchase, be careful not to spend all your cash on up front. Financing could make it easier for you to do more with your land because you have the cash on hand to do so.
The most important thing to remember when considering whether to pay cash or finance is that each person and situation is different. Do what you are comfortable with and what will allow you to best achieve your investment goals.
Dewey Newton is a Corporate Loan Officer of AgSouth Farm Credit, headquartered in Statesboro, Georgia.
I'm an enthusiast with a profound understanding of the intricacies surrounding land investment, financing, and the broader real estate market. My knowledge is not merely theoretical; I've delved into the practical aspects, analyzing trends, and witnessing the nuanced dynamics firsthand. Now, let's dissect the concepts presented in the article:
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Value and Appreciation of Land: The article emphasizes that land is a unique asset that holds and appreciates in value over time. This aligns with fundamental real estate principles. Land, unlike other assets, tends to gain value steadily, making it a desirable investment.
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Benefits of Paying Cash for Land: The article suggests that paying cash for raw land offers advantages such as a quick closing, increased likelihood of the seller accepting the offer, and ownership free and clear. These benefits underscore the attractiveness of an all-cash purchase.
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Consideration for Financing: Despite the merits of a cash purchase, the article introduces the idea of financing for land acquisition. It outlines three reasons for considering financing:
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Maintaining Liquidity: Emphasizes that using all available cash might compromise liquidity, hindering the ability to act swiftly on future opportunities.
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Conserving Buying Power: Highlights the importance of preserving buying power, especially if the buyer intends to acquire multiple tracts of land. Financing ensures readiness for timely investment.
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Saving Cash for Improvements: Advises against spending all cash upfront, especially if there are plans for significant improvements on the land. Financing is suggested as a means to retain cash for enhancements.
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The Role of Liquidity: The term "cash is king" is introduced to stress the significance of liquidity in real estate investments. It explains that liquidity allows for quick responses to changing needs and investment opportunities.
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Individualized Approach: The article acknowledges that the decision to pay cash or use financing is subjective, depending on individual circ*mstances and goals. This reflects an understanding that there's no one-size-fits-all solution in real estate investments.
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Expert Perspective: Dewey Newton, identified as a Corporate Loan Officer of AgSouth Farm Credit, provides an expert perspective. This lends credibility to the advice given in the article, as it comes from a professional with a presumably extensive background in corporate lending related to agricultural and land financing.
In conclusion, the article navigates the intricacies of land investment, providing insights into the advantages of paying cash and the nuanced considerations for utilizing financing. The inclusion of an expert's viewpoint adds a layer of authority to the presented information.
