Buying Vacant Land Part Deux: Monetizers & Exit Plans

Sally Pierce at GoodPlaceHQ

When you’re buying property, you’re essentially buying a piece of land and the building on top of it. In general (and in Malaysia at least), land value goes up over time. On the other hand, building values go down. When you’re buying vacant land, you’re investing in the only component of property that makes money.

In last week’s guide, we have talked about the importance of having a sensible exit strategy when you’re buying land, and why you shouldn’t be placing your hopes on a big developer buying you out in the future. In today’s installment in this series, we’ll explore on some of the more practical monetization strategies related to land investments.

Monetization for residential properties can be relatively simple because usually you make money either by generating rental cash, or by selling at a higher price (or ideally, both). For vacant land, it’s not that straightforward, and for that reason, in general, it is not for the newbie.

Like any sensible investor, you’ll need to figure out how you gonna make money from the piece of property in the short term while you wait for the value to go up in the longer term. The rest of this article will show you how to do this.

Short-Term Monetization Strategies

Vacant land investments typically go under the radar because they don’t generate immediate cashflow. The key here is to make it pay its way while you wait for it to “brew” over the long term (see the next section). I can’t possibly list out all the things you can do to generate cash from a piece of empty land, but here are some ideas to consider:-

  1. Turn it into a farm of chicken coops
  2. Rent it out for a transport company to store buses and trucks
  3. Build some modular, pre-fab homes to rent out, or to sell

Of course, I’m just half-joking about (1). There’s this old friend of mine who got fed up with KL life and moved back to Batu Gajah to build chicken coops on the vacant land he inherited from his late father. He’s doing pretty well for himself, earning way more than before when he was working as an investment analyst for a major foreign bank in the city.

Now that prices of property have gone through the roof and becoming severely unaffordable for the average Ali, Ah Chong and Muthu, there’s an opportunity to build low-cost, pre-fabricated homes which are cheap to build, and perhaps easier to sell or rent. Of course, this idea is not new elsewhere, and in Malaysia, there are some enterprising types who are already doing this – in fact, there was this chap in Klang who built himself a double storey container home for less than RM100,000. What if you can get hold of a vacant land to build some cheap container houses to rent out? You’ll be hitting paydirt in absolutely no time at all…

Long-Term Monetization Strategies

The most obvious (and profitable) exit strategy is to re-zone the piece of land, divide it and then get the approval for development. And as you can imagine, there’s an awful lot of work (and hustle) required, not to mention the amount of red tape that’s required to secure the appropriate approvals. If you can pull this off (and I know more than one guy who have gotten rich doing exactly this) then soon you’ll wonder why you bothered with apartments and city condos. If there’s one way to get rich with real estate then this has got to be it.

Remember: the usual considerations of supply and demand are still important – if the land that you’re buying if surrounded by similar tracts of empty land, then don’t expect it to skyrocket in value anytime soon. Here’s a good rule of thumb to follow:- if there’s growth potential, and the surrounding 10km radius area is filled with land which are already built on, then you might just be looking at a potential goldmine.

About Khai Yin

When I am not writing for GoodPlace.my and helping my readers find properties though the DealMatcher service, I spend time doting on my three kids: Wenyi, Qinyi and Eian. My personal stuff, some published essays and contact details can be found at khaiyin.com

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