Is buying land a good investment? What the data and real owners say

It's smart when you have a clear reason and the numbers still work if prices don't rise: you'll use the land (to build, hunt or farm), you can lease it, or you're buying below recent sold prices in an area that's growing. It's a gamble when the only plan is to wait for it to go up, especially with borrowed money or money you might need in the next few years. Before you buy, confirm legal access, find out what the property tax will be, and know who you'd sell it to later.

Raw land pays nothing unless you lease or use it, but property tax is due every year. It can't be depreciated for taxes, it's harder to finance than a house, and it can take months to sell, which hurts most when you need the money. Owners also carry liability if someone is hurt on the land, have to deal with trespassing, dumping and boundary problems from a distance, and can see the value cut by zoning changes or new limits on how the land can be used.

Nationally, USDA's average value of U.S. farm real estate went from $1,900 an acre in 2006 to $4,500 in 2026, about 4.4% a year. Over the last ten years (from $3,010 in 2016) it was about 4.1% a year. After inflation, those work out to roughly 1.9% and 0.9% a year. Individual parcels vary far more than the average: land in the path of a growing town can double in a few years, and remote land can go nowhere for a decade.

For most people, no, as a main investment. A broad stock index fund pays dividends, can be sold in a day, costs almost nothing to hold, and spreads risk across hundreds of companies. A parcel of land pays nothing unless you lease it, costs property tax every year, and can take months to sell. Land makes sense as a smaller, long-term holding, especially if you'll also use it or can earn from it, or if you know a local market well enough to buy below value.

It's an informal rule of thumb, not an official standard, and investors use it in different ways. Most often it means a rental property's yearly rent should be at least about 7% of the purchase price; some use 7% as a target for total yearly return instead. Raw land fails the rent version by default because it earns nothing. Even rented farmland falls well short: for 2026, USDA put average cropland rent at $160 an acre against an average value of $6,020, about 2.7% a year before property tax, and pasture rent at $16.50 an acre against $2,000, under 1%.

Yes. The usual ways are paying too much (often to a seller who bought it cheaply and marked it up), buying land with no legal access or no buildable site, financing it at a high rate and then needing to sell in a slow market, and holding for years while property taxes and interest eat the gain. Selling costs, such as commission and closing costs, also come out of any profit.

Land that more people will want later: within a reasonable drive of a growing town, with road frontage, power nearby and soil that can support a septic system. Land that earns rent while you hold it, such as farmland or timberland, can also produce a return without depending entirely on appreciation. Remote, landlocked or flood-prone land is cheap for a reason and is the hardest to sell.

It can be, if you're sure you'll build and you've confirmed you can: legal access, a site that passes a perc test (or public sewer), a realistic cost to bring in power and water, and zoning that allows a house. Get those checks done before you close, not after. Budget the years of property tax and any loan interest you'll pay before you build.

Yes, on the gain over your cost basis (what you paid plus improvements and certain costs). If you held the land for more than a year, it's a long-term gain taxed at 0%, 15% or 20% depending on your taxable income, according to the IRS, and higher earners can also owe the 3.8% net investment income tax. Land held for investment can also be swapped for other real estate in a like-kind (1031) exchange to defer the tax. Talk to a tax professional before the sale, since a 1031 has to be set up before you close.