The current real estate market in Mexico offers great opportunities to acquire land with low prices and in privileged locations.
Faced with the possibility of acquiring a lot, the first question that an investor must ask is: what am I going to do with it?
Buying land just because it is cheap is not the best business option. Making use of your money to invest in the purchase of land will be an excellent idea as long as you are clear about what you will do with it.
Before buying you must develop a financial strategy.
A piece of land in Blue World City can generate a very good return Everything will depend on the type of land and the financial strategy of its owner.
For what reason? A lot is different in the hands of a builder than in those of a peasant, or in those of a lawyer who does not have time to do something with it.
For this reason, it is important to be clear that when acquiring a land, it is not only about investing capital, time also plays an important role, in addition to the cost of the same you must add the expenses of title deeds and taxes that are paid.
First of all, in order to develop a successful strategy, take into account the type of land, since there are advantages and disadvantages between land in a commercial area and land in a residential area and that these are according to the type of business you want to implement.
Options to earn money when buying land
These are the 7 strategies that we advise to earn money with a land according to our experience.
1. Buy and sell
It is the simplest option of all since it does not require knowledge in construction or any other type, since it is limited to acquiring a lot at a low price and later selling it at a higher price, with the yield being the difference between one quantity and another.
It is about turning the land around but — in order for it to generate a higher yield — it is necessary for the lot to be bought below its market price, so you must be very attentive to buying opportunities, that is, you must invest time and make a constant search.
Taking into account the location and characteristics of the area will determine that the business is a success.
Why is this important?
Taking a closer look at the offer will help you decide if it really is an opportunity. There is a risk that the price is low because the location is not good or it has been for sale too long.
If you want to make this a way to earn money, make sure that the land does not have any details that make it difficult to sell it later.
2. Buy, hold and sell
This strategy requires a little more patience than the previous one because it implies that —after buying the land— you have to wait a period of time for its price to rise and sell at a higher price.
Not only that, you must have the financial solvency to leave the capital deposited in the asset itself.
The main disadvantage of this strategy is that you will have to make some expenses, this to keep the land in good condition and up to date on your taxes, for example the annual property payment.
If you have identified a growing area and you are not in a hurry to recoup your investment, this is the ideal option. In fact, we highly recommend the Mexican southeast for its investment potential and real estate appreciation capacity.
To make this a successful business, the investor must anticipate the potential of the land he is buying with 10 or 20 years, since real estate is a long-term business.
It is also important to bear in mind that the profitability of a property is more relevant than its price or the capital gain that it may achieve.
3. Buy, grow and hold
This strategy is ideal for those who have experience in the management of agricultural developments, either through cultivation for the subsequent sale of the product or the breeding of some species.
The downside of this strategy is that only those who know farmland management can implement it. Besides, a more or less large extension of land is required, which needs to be located outside the city.
Similarly, the gains obtained through agriculture can be reflected from 1 to 7 years depending on the type of crop.
Analyzing factors such as the fertility of the soil or whether it is floodable will be a key piece to make a successful purchase that leads you to generate income with a land for this purpose.
An interesting option can be the cultivation of species such as succulents and ornamental plants, establishing a small nursery that can coexist with the urban landscape.
It is also feasible to grow a pine or nightshade farm, although a capital investment will be required in growing the crop before obtaining returns from the sale of the plants.
If it is a land for livestock purposes, the topographic, physical and chemical aspects of the soil must be analyzed, for example, if the land is very steep — more than 30 or 40 degrees — it can be said that it is not suitable for farming. livestock due to erosion problems.
4. Buy, develop and maintain
If the intention of the purchase is to build on the land, the project to be developed can be leased later and generate immediate income.
Among the most attractive options for this strategy are:
- Start your own business and offer service, with a plot of land the possibilities are many, from a school giving private lessons or if you like to cook a restaurant.
- If you do not have a product or service to start your own business, you can build a commercial plaza with several premises and rent them.
- The shared leasing of offices or warehouses under the coworking modality is an alternative for those looking for small, well-located spaces.
- The vacation approach, for example building condominiums or apartments in privileged areas for tourism -such as Playa del Carmen- and renting it to national and foreign visitors, there are even platforms for this type of service that facilitate the process such as Airbnb or Vrba in addition of social networks.
5. Buy, change land use and sell
Some lands can still be acquired in a rustic stage; that is, when its type of use has not yet been defined and a qualification must be made to process a deed that specifies its use.
A later reclassification, for example, for residential use would make it more valuable to potential developers and more desirable, as it is an additional step that they do not have to do themselves.
If you want to make the change in a forest area that implies a total or partial removal of vegetation for non-forest activities, it is necessary to request the change of land use from the Ministry of Environment and Natural Resources (SEMARNAT).
SEMARNAT describes the change in land use as the transformation of the vegetation cover to convert it to other uses, among the main ones are agriculture, livestock and infrastructure expansion.
Due to the consequences of the change in land use, this whole process may take several years, but it allows buying at a very low cost.
If you have the time and capital to invest, it can be a profitable business in the long run. To do this, you must carry out a market research to ensure that the turn you want to give to the terrain is correct.
6. Buy, upgrade and rent
When we talk about improvements, we refer to urbanization since when buying a lot it may be that it is not yet urbanized.
The first thing is to define the type of business that is going to be given to the land in order to later develop the land and adapt it. This is so that it can be leased to a franchisee or entrepreneur interested in building on it.
As in the previous points, the location is important, if you are in an area that is not suitable for commercial premises or franchises, it may take longer to rent and generate losses.
Another example of improvement is buying a piece of land and deciding to put a parking lot on it because there isn’t one nearby in the area. In this way, the owner of a nearby business or residential area can lease it or acquire a pension contract for the cars of its employees or tenants.
In the case of franchises, it is very likely that they will be the main interested in acquiring the land if at any time you decide to put it up for sale. In this way you ensure a potential buyer and obtain constant income while over the years the value of the land increases.
We have prepared for you this short guide on how to make a profit by renting land.
7. Buy, develop and sell
This strategy refers to buying the land with the intention of developing it with a fully finished construction and subsequently selling it to a final buyer.
For example, buying land for residential purposes to develop a private or subdivision. The real estate sector has gained special relevance in the southeast of the country in cities such as Mérida and Playa del Carmen.
Despite the real estate boom and the number of real estate companies in this area, it is a profitable business.
If you buy a smaller piece of land, a good graphic designer for advertising and a simple website with an online store and virtual assistant will suffice for the sale of the properties, especially in times of crisis where virtual purchases have become relevant.
As we mentioned in the buying, developing and maintaining section, building warehouses, premises or offices to sell is also good business.
This strategy of course has the disadvantage of requiring a strong initial investment to carry out the construction, but there are business models such as real estate crowdfunding that may be appropriate for several investors.
Acquiring land is a safe investment
Regardless of whether the land you acquire is for industrial purposes, for residential use or in a commercial area, it will be a safe investment, as long as you take into account these key points to invest that will help you earn extra money with your property.
Before buying a plot of land, it is necessary to check its situation regarding land use so that it matches your investment project. For example, if your purpose is to build premises, the land use must be commercial.
For this, you must define in advance the type of strategy to implement, in addition to developing a business plan that includes factors such as:
- Financial indicators
- Sales expectations
- Control mechanisms
- Tax scheme
- Market study
In addition, it verifies that it has a property title that allows the transfer of rights through a sales contract or other valid contract and the payment of corresponding taxes.
In each state there are variations in the legal framework for the purchase and sale of land, being uninformed in this regard is a serious mistake, so we advise you to contact experts on real estate issues – as is the case of BMF Inversions – who will know how to advise you. and find the best option for you.