As the residential real estate market in the United States continues to heat up, I’ve been looking for alternative ways to invest. One option, first introduced to me by my Grandfather years ago, is landing banking. Land banking is the practice of acquiring land, and then just “sitting on it” like you would a savings account in a bank.
The premise is that over time, as development progresses in surrounding areas, the value of the land will increase. During that time, because you’ve kept that land undeveloped, the maintenance cost (including the tax basis) has stayed very low. At some point in the future, you sell the property in a 1031 exchange, and the process starts all over again.
This real estate investment strategy has its pros (such as it’s easy to start and has a low maintenance cost) but it also has its cons. The two biggest cons is that the land can generate little to no cash flow, and empty land is a prime target for dumping.
The easiest solution for this is to find a way to monetize the empty land, and two friends of mine have come up with one which I call “Camp Hacking”.
The concept is simple. Scouring public and private auction sites, they acquire small remote parcels of land. Their goal is to acquire a piece of property for under $1,000.
They then add a composting toilet to the site (est. $500), and voila – they have a campsite.
They post this campsite of listings websites like www.hipcamp.com, where they generate $20-$30 a night ($300-$500 a month) from campers looking for remote getaways far from the hustle and bustle of “city life”. Suddenly their empty piece of land is a thriving revenue generating machine.
Let’s run the (hypothetical) numbers:
Acquisition Cost: $1,000
Equipment: $ 500
Sub Total $1,500
Annual Maintenance Costs
Accounting: $ 400
Corporate Licensing: $ 300
Marketing Fees $ 500
Property Taxes $ 150
Sub Total $2,350
Average Monthly Revenue $ 300 does not include fee to manage
Months Until Break Even: 20 Months
Ongoing Monthly Profit: $104
Return on Initial Investment: 6.9% not including appreciation
So even at a conservative estimated monthly revenue, the property delivers a tidy return. If you can increase occupancy and / or the average nightly revenue, and decrease costs … perhaps by acquiring more properties, and allocating the fixed costs against a greater revenue stream … then this number only increases.
As with all real estate investing, it all comes down to the numbers. Camp hacking represents just another opportunity to creating semi-passive revenue from real estate.