3.3.3. Land Development
Raw land programs are in the business of purchasing unoccupied land in the expectation that its value will appreciate significantly over time. Land may appreciate naturally by its location or development potential. Alternatively, the properties may be improved, for example, by installing water and sewer lines prior to selling them to a developer. Usually raw land will not generate any income while it is held, although sometimes agricultural property will be leased to a farmer or harvested of its timber.
Land cannot be depreciated, so the profitability of raw land depends heavily on its appreciation potential. In the meantime, the initial property cost, debt service, and ongoing tax and insurance payments will tie up the investor’s cash. Because land can take