Key Takeaways
- Land concentrates all real estate risks with none of the protective cash flow — carrying costs come entirely from investor capital.
- Entitlement uncertainty creates binary outcomes where 60-80% of land value depends on governmental approval.
- An estimated 40-50% of speculative land purchases result in losses when adjusted for carrying costs and time value of money.
- Use option agreements, complete due diligence, and maintain exit strategies at every stage to manage risk.
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Test Your Knowledge
1.What percentage of speculative land purchases result in a loss when adjusted for carrying costs?
2.What is the primary advantage of using option agreements for land investment?
3.What makes land the riskiest real estate asset class?