When Mark Twain said "Buy Land. They're not making it any more", he made it sound like investing in land is a sure-thing. Sure-things don't exist in the real world, but investments made using a professional gambler's understanding of odds and payoffs can make investments much more profitable.

Using cycles to predict odds:

        Let's look at real estate in general as an investment and make some basic assumptions. First, the value of land will always go up . . . eventually. This is a good start to putting the odds in our favor - but "eventually" is the key word here, because the value will not go up continually. Like every economic model there are cycles based on many factors. Some of the factors are obvious such as interest rates, costs of building materials, inflation in general and amount of disposable income of home buyers. Others are harder to predict, such as social trends and unpredictable events, either catastrophic or beneficial.

          One consensus is that due to the high inventory of unsold homes and the fallout from the failure of bad mortgages, house values have now almost hit bottom and homes will continue to sell below their value of two years ago for at least another year, maybe two. Your opinion of exactly when this will play out may differ, but whatever the amount of decline or time for recovery, eventually the demand for homes will rise along with home values. The stock market will also rise over the long haul, although the stock market has more fluctuations and a much greater variety of variables.

Odds and payoff in exurbia:

        Exurbia is the land beyond the suburbs. It is rural land within easy commuting distance to a metropolitan area. While every investment must be evaluated as a unique situation, there are many common factors that apply to exurban investments in general. In many ways, investment in land in exurbia has favorable odds and payoffs for a better than average investment - - and with an upside potential of huge profits when managed properly.

Some factors which improve the odds and payoff for land investments

*    Stability:   rural land cycles are less volatile than the cycles for real estate in general, i.e. the cycles are less extreme. For some, this might make rural land investments less exciting, but a sophisticated investor sees this stability as improving the odds of predicting the cycles.

*    Population growth:   the population of exurbia continues to grow despite other market fluctuations and population decrease in metropolitan areas. This natural growth counteracts some negatives of the economy.

*    Exurban migration:   other factors that indicate better than average odds for land values to increase in exurbia are: 1) increased telecommuting for many people with city based jobs; 2) affluent baby-boomers retiring in great numbers and looking for a more peaceful lifestyle; 3) families looking for an environment with better schools and a lower cost of living.

*    Bargain purchase prices:   land can be purchased at 20% to 30% less than appraised value because of the slump in real estate sales and lack of competition from national building chains. This creates a larger payoff when the market and economy recover offering a larger immediate payoff.

*    Lower tax/maintenance/holding costs:   taxes and upkeep costs for land are significantly lower than for improved property. When the investment strategy is to hold the property until the market improves this greatly increases the payoff

*    Subdivision -> profits:   payoffs increase when a 100 acre tract is subdivided into 10 lots of 10 acres each. The sum of the values of the 10 acre lots is immediately worth significantly more than the original tract of 100 acres.

*    Devlopment:   strategic development timed to meet market demands for land use can increase the payoff dramatically.