How to Invest in Land

Buying raw land can be profitable if you know how to invest like a real estate developer. High yields, passive income, and significant profit margins can all be obtained through land investments.

What exactly is Raw Land?

Commercial property, residential property, and land are the three categories of real estate investments. A parcel of land with no existing buildings or equipment that can be developed for commercial or residential real estate, farming, ranches, or natural resources such as mineral, water, or air rights is known as vacant or raw land.

In essence, when you invest in land, you are purchasing undeveloped, undeveloped land. The zoning of raw property is critical since it dictates how the area can be developed in the future.

Buying Land in Hawaii

Long ago, land in Hawaii could not be privately owned. It was governed by the mōʻī (king) and his aliʻi (high chiefs)  through a systematic land division known as an ahupua‘a. The Great Mahele of King Kamehameha III in 1848 paved the path for individuals to own land and properties in Hawaii.

Land can now be purchased and sold in Hawaii, but only in particular places and in accordance with Hawaii real estate laws and regulations. Let’s take a look at the history of land ownership in Hawaii, from obtaining title to land today to the ahupua‘a of the past.

Requirements to Buy Land in Hawaii

Property in Hawaii can be purchased by anyone from anywhere in the world. However, if you are not a Hawaii resident that files Hawaii state income taxes, buying or selling land in Hawaii may provide further challenges.

If you are not a U.S. citizen, you must have a green card or a visa to utilize the home as a permanent residence. The property can be used as an investment or vacation residence by non-US citizens.

While anyone from anywhere in the globe can buy property in Hawaii, non-Hawaiians will be liable to a 7.25 percent tax on the sale price if they sell it, according to the Hawaii Real Property Tax Law, or HARPTA. During escrow, this 7.25 percent tax, as well as a 15 percent federal tax for non-US citizens known as FIRPTA, will be automatically withheld. If you are a non-Hawaii resident who wants to sell your property in Hawaii, you need consult an accountant because HARPTA and FIRPTA have different tax forms and procedures.

Another challenge in purchasing property in Hawaii if you are not a U.S. citizen is obtaining finance. Of course, an all-cash sale is simple, but financing through a local lender or even a foreign lender might be complicated due to differences in documentation between nations.

Where Can You Buy Land in Hawaii?

In Hawaii, there is a scarcity of land. There is a finite amount of land with improvements, such as houses, and there is also a finite amount of undeveloped ground.

Today, the zoning or use designation of land has a lot to do with where and what kind of land you can buy in Hawaii. The acreage available on each of the Hawaiian Islands varies, as do the zoning restrictions in each county. Here’s a GIS map showing all of Hawaii’s islands, along with detailed details on each of their zones.

The city and county of Honolulu, on the island of Oahu, has zoning for preservation, agriculture, country, residential, apartment, apartment mixed-use, resort, commercial, business mixed-used, and industrial uses.

The Bottom Line

Land investments are undoubtedly riskier than other investments, but they can also be incredibly profitable. While there is opportunity in purchasing and selling land, there is also a lot to know about this investment approach. Determine whether the risk is worthwhile and whether this investment plan is appropriate for your portfolio.

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