If the financial meltdown of 2008 taught investors that land isn’t necessarily a surefire asset, the market’s subsequent rebound shows that land continues to be a lucrative investment. By understanding your options and doing your homework, you can find a land investment ideal for your portfolio. Whether it’s an apartment building or an exchange-traded fund for wheat, a land investment can bolster your financial returns. Here are your options and how they work. For more help with investing in land, consider working with a financial advisor.
Types of Land Investments
Investing in land isn’t a one-size-fits-all proposition. Investors with varying amounts of wealth and risk tolerance might gravitate toward a specific type of land investment. Use the following list to gauge which land investments appeal to you.
Commercial and Residential Land Investments
Commercial and residential properties have broad appeal because investors of all sizes can access them. For example, you might not be able to afford an apartment building, but you can purchase shares in a real estate investment trust (REIT) as you would purchase shares of a company’s stock.
REITs allow you to focus on one type of real estate, such as residential properties, or combine any number of types from every sector of land investments. That said, REITs are generally diversified whether you choose one or multiple types of real estate investments. In addition, as with investing in company stock, your investments can typically be as small or large as you like.
The downside of investing in REITs is that you won’t have any actual land to use or inhabit. Therefore, if owning your investment properties appeals to you, purchasing land may be a preferable route if you can afford it.
Livestock and Crop Farmland
Becoming a homesteader allows you to directly own your investment in a specific property. Living on and running your farm or ranch might be your dream come true – and the potential returns are icing on the cake. However, raising crops and livestock is expensive and risky. As a result, deep pockets and the ability to shoulder stress are all but necessary to manage this type of investment.
Crops and livestock are just the beginning of investing in agricultural land. For instance, you could cultivate an orchard, vineyard, mineral development land, timber farm or recreational land. Generally, these investments require less up-front capital than crops and also allow you to live on the land.
Specialized Agricultural Investments
On the other hand, if farming interests you but owning land doesn’t, exchange-traded notes (ETNs) and exchange-traded funds (ETFs) are a less costly way to get exposure to agricultural land. For example, the Teucrium Corn Fund provided a 35.1% return over the past year through investments in corn futures.
Like crops and livestock, you can purchase shares of ETFs and ETNs for specialized land if running your own timber operation seems overwhelming. Through these funds, you’ll have exposure to land rich in timber, oil and more and see healthy returns without owning an acre.
Tips for Investing In Land
If investing in land seems daunting, following these tips can help you make the most of your investments:
Understand Your Investment
Dotting each “i” and crossing each “t” can be irritating, but it’s usually worthwhile. Details like zoning laws, property lines, parking and whether an old apartment building has lead paint can make the difference between a profitable investment and a financial headache. Additionally, a title search can help ensure you would own the land outright with no disputes.
Research the Region
Every piece of land sits in a place where employment, household income and population interact and fluctuate. Ideally, the land you invest in will be located in a region on track to experience upticks in these crucial factors.
Follow Your Risk Tolerance
It’s recommended that investors don’t go against the grain of their preferences. If you’re risk averse, investing in areas with high population and income might be the solution. Buying land in a region with consistent demand and healthy economic activity can help offset the possibility of losing a fortune on a land investment.
Check the Water Waitlist
Some municipalities forbid new hookups to city water because of water shortages. For example, the city of Cambria in California hasn’t approved new water connections for two decades. As a result, reviewing your city’s water situation is critical before building new residential or commercial properties.
Verify the Tax Situation
Every municipality has different tax stipulations that can affect your investment’s profitability. For example, your city might charge income tax to residents and businesses. In addition, you might receive special tax breaks for using land in a specific way, such as farming.
Review Your Mineral Rights
As with taxes, mineral rights can vary based on region. For instance, your investment might grant ownership of the land you want but not what lies a few feet beneath the surface. This scenario could lead to legal mining or drilling by other parties with no financial benefits for you.
Play It Cool During Negotiations
When haggling over a desired piece of land, it’s recommended to leave your emotions at the door. Even if you’re excited about the deal, allowing emotions to lead the way can result in poor judgments and mistakes during negotiations.
Key Considerations When Investing in Land
Investing in land involves more than finding a plot and making an offer. Legal issues can render the most attractive land a lousy investment for reasons out of your control. For example, your municipality might tightly control how you can use the land in question, ruining plans for potential buildings or farms. Plus, part of the property might be legally accessible to your neighbors due to land easements.
Furthermore, bordering a body of moving or standing water can affect land accessibility and create floodplain conditions. As a result, it’s essential to review the land’s deed to understand the legal ramifications of ownership.
Once you’ve ruled out legal impingements, examine the land’s utility connections. Paying for new water or electrical lines can eat into investing profits significantly. In addition, proximity to towns and cities, the likelihood of attracting trespassers and how the land will impact your taxes are all vital to consider.
Is Investing In Land Right For You?
Several solid reasons might lead you to invest in land. First, you might aspire to own and operate a farm or vineyard and enjoy the financial returns as a side benefit. Or, as an investor looking to diversify their portfolio, you might invest in REITs with a proven track record. On the other hand, you might do your homework on a commercial or residential property and start collecting rent.
Investing in land might not be suitable for you if you don’t want to do extra research on your investments or take on more risk. While real estate in its many forms can be a lucrative investment, uninformed decisions generally result in losing money.
The Bottom Line
You can invest in land through residential and commercial property, farmland and specialized agricultural investments. In addition, you can invest by directly purchasing land or buying shares of REITs, which give you a diversified slice of the real estate market, spreading risk across numerous assets.
When investing in land, it’s recommended to research the relevant factors in your situation, such as tax obligations, title status and environmental implications. That said, the work is typically worth it and land can be a profitable asset for any investor.
- Land investments can be intimidating, especially if you’ve never purchased property other than your home. That’s where a financial advisor can help. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- While it would be great to be a real estate mogul, the reality is that most investors don’t have millions to throw at land. Not to worry – here’s how you can invest in real estate with little money.
Photo credit: ©iStock.com/fotoVoyager, ©iStock.com/Techa Tungateja, ©iStock.com/sorn340
Better Buy: AGNC Investment or Annaly Capital?
Welcome news regarding elevated inflation is prompting signals that there may be a slowdown in the Federal Reserve’s pace on interest rate hikes. With longer-term interest rates beginning to fall, mortgage real estate investment trusts (REITs) are once again getting attention from the investment community. Mortgage REITs struggled over the past year as rising rates caused the value of their investment portfolios to decline, which translated into big declines in book value per share.
Surprisingly, these REITs still managed to maintain their dividends, and the yields have become quite attractive (provided they can be maintained). The biggest names in the mortgage REIT space are Annaly Capital (NLY -0.41%) and AGNC Investment (AGNC -0.60%).
Given all the news recently, which one is the better buy right now?
Mortgage REITs are a different animal than the typical REIT
REITs traditionally focus on developing real estate properties such as apartment buildings, office buildings, or shopping malls. They then rent out the units to tenants. Their earnings generally come from the spread between the rents they collect and the interest they pay on the debt that financed the buildings.
Mortgage REITs don’t buy properties; they buy real estate debt (i.e. mortgages). They typically use borrowed money to build their portfolios, and their earnings are the difference between the interest they earn on the mortgage-backed securities and the interest they pay on their debt. In many ways, mortgage REITs’ operations are closer to a banking model than the landlord/tenant model that characterizes the typical REIT.
AGNC invests in mortgages guaranteed by the U.S. government
AGNC Investment invests primarily in mortgage-backed securities which are guaranteed by the U.S. government. For the most part, this means AGNC invests in mortgages guaranteed by Fannie Mae and Freddie Mac. Since the principal and interest payments are backed by the U.S. government, AGNC Investment takes very little credit risk, and the interest it earns on these securities tends to be lower. That lower risk also means lower returns. AGNC then uses a lot of borrowed money (think of it like margin on your stock account) to generate a double-digit dividend yield.
Annaly has a more diversified portfolio of assets
Annaly invests in agency mortgage-backed securities, but it also buys loans that are not guaranteed by the government. These loans pay higher rates of return, but they also tend to have a higher potential for downside. Annaly is a big investor in loans that are ineligible for a government guarantee. These loans are often referred to as non-QM and are often made to professional real estate investors and the self-employed borrower.
These non-QM loans are nothing like the bad old subprime loans of yesteryear. They require sizable down payments and proof that the investor will be able to pay the loans with rental income. So the risk is somewhat mitigated.
Ultimately, the decision on Annaly versus AGNC depends on the economic forecast. AGNC Investment will probably outperform Annaly if we head into a recession, since it won’t have to worry about credit losses from the resulting rise in loan defaults. AGNC will also be better protected if housing prices begin to fall. That said, Annaly has a much more diversified portfolio of assets, which helps it outperform in most interest rate environments.
However, Annaly will be more exposed to potential credit losses if the economy enters a recession. If housing prices fall, it will negatively affect the value of its non-QM loans if delinquencies begin to increase. Annaly also holds a large mortgage servicing portfolio, which is a stable source of additional income and acts as a hedge if interest rates rise.
Watch the book value per share
At current levels, AGNC Investment is trading right around book value per share of $10.04 and has a dividend yield of 14.4%. A bet on Annaly is a bet on a drop in interest rate volatility, which will probably happen once the Fed ends its tightening cycle.
Annaly is trading at a premium to its book value per share of $19.94; however, it has a better dividend yield of 16.6%. As a general rule, mortgage REITs trade right around book, so it usually pays to buy them at a discount to book, not a premium.
Despite Annaly’s higher yield, I like AGNC better, as home prices are beginning to decline, which will weigh on Annaly’s credit-sensitive book. I also don’t like buying mortgage REITs above book value. All this means I think AGNC Investment is the better buy at the moment.
Core Asset Wealth Management Launches Socially Responsible Investment Strategies
Core Asset Wealth Management is a financial management company. Recently, the company has incorporated SRI and Gene Therapies into its services.
Seoul, South Korea–(Newsfile Corp. – December 3, 2022) – Core Asset Wealth Management approaches socially responsible investing (SRI) in the latest development and seeks to maximize investment returns while avoiding companies that harm the environment or society.
As socially responsible investing has evolved into Environmental, Social, and Governance support, Core Asset Wealth Management is facilitating its clients with sustainable investment strategies. As the name implies, it is an investment process that considers environmental, social, ethical, and governance issues before allocating funds. All investors want to see their portfolios grow, but not at the expense of ethical practices, society, or the environment. Popular sustainable industries have recently included solar, wind, waste management, and water filtration.
Core Asset Wealth Management investment planning is not just about finding ethical and socially responsible companies to invest in but also about taking an activist role by using their voting rights to affect change.
The company is focusing on Gene Therapy. It delivers an innovative yet controversial area enticing to invest in due to the possibility of curing previously incurable diseases. However, many ethical issues arise from the processes used, such as animal testing and the resulting changes that can occur in our DNA.
Core Asset Wealth Management uses many different socially responsible investment vehicles that can be used with Wealth Management. Stocks and bonds are always readily available, but applying the various SRI filters can be overwhelming and time-consuming. Socially responsible mutual funds and exchange-traded funds are more accessible ways to participate in SRI investment. For accredited investors, more customized SRI investments are available such as hedge funds, venture capital, and private equity funds.
Furthermore, Core Asset Wealth Management focuses on Ethical investing and shunning companies that test their products on animals, provide harmful effects, or regularly engage in fraudulent or deceptive practices.
By avoiding investments in these companies, Core Asset Wealth Management sends a message that they disagree with their unethical operations and support businesses that improve their lives and community. Ethical Investments provide the opportunity to apply their moral beliefs to the company’s Retirement Planning and other accounts. Core Asset Wealth Management Ethical Investments meet environmental, social, and ethical criteria to be included in various socially responsible investment (SRI) vehicles. These investments are divided into multiple categories based on their grade of green qualifications to help potential investors evaluate their options.
With new developments, Core Asset Wealth Management has come up with the following additional services:
Green Investments – Light
Light green investments are the lowest part of the ethical investment scale. This responsible investing filter avoids gambling, military, defense, nuclear energy, “sin” related companies, and weapons manufacturers.
Green Investments – Medium
Medium green investments are in the middle and apply a more rigorous filter that avoids oil and gas companies and alcohol and tobacco.
Green Investments – Dark
Dark green investments apply the strictest filters for investment ethics. They screen out companies that are active polluters, ignore social issues and focus on renewable energies like solar, recycling companies, and water purification investments.
About the Company – Core Asset Wealth Management
Core-Asset Wealth Management provides financial analysis and consulting to a broad range of retail clients and businesses. It also facilitates its client with Account Management, Market and Media Analysis.
Potential clients should visit the official https://acg-wealth.com/ for further updates.
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/146692
Turkey’s CHP Vows $100 Billion of Direct Investment If Elected – BNN Bloomberg
(Bloomberg) — Kemal Kilicdaroglu , the leader of Turkey’s main opposition party, promised to bring $100 billion of direct investment if elected to power in the elections scheduled for June next year.
“There will be at least $100 billion of direct investment in the first three years of our government,” Kilicdaroglu said in Istanbul on Saturday, speaking at an event at which the CHP unveiled some of its economic, political and social policies.
He also said his government would secure an additional $75 billion investment in the first three years, from pension funds and wealth funds abroad, among other resources.
The event dubbed “The CHP’s Second Century Vision” included speeches from Kilicdaroglu’s top economic aides and prominent economists, including Massachusetts Institute of Technology professor Daron Acemoglu.
Faik Oztrak, CHP spokesman and deputy chairman responsible for economic policies, said the party would appoint a central bank governor who is “respected by the whole world.” The governor’s aim would be to permanently bring down inflation to single digits, he said.
Incumbent central bank governor Sahap Kavcioglu is frequently criticized by the opposition over his failure to rein in inflation. Annual consumer prices in October accelerated to over 85%, the highest in almost a quarter century.
Under pressure from President Recep Tayyip Erdogan, who is fixated on economic growth ahead of elections, the bank has cut its interest rate for four straight meetings, lowering it to 9% last month.
Read more: Turkey Slashes Interest Rate in Line With Erdogan’s Demand
Erdogan is a self-proclaimed enemy of high borrowing costs and he has fired three predecessors of Kavcioglu for clashing with him on monetary policy. Acemoglu said inflation would be lowered only through “normalization” in monetary policy and by fixing policies on interest rates.
“Turkey’s company and bank balance sheets also need to improve. If companies and banks have negative balance sheets they can’t make new investments. And Turkey needs significant new investments,” he said. “This will again be fixed with the right monetary policy, right financial policy and resources.”
©2022 Bloomberg L.P.
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