Rethinking Your Homes Extra Land as a Second Source of Income

CHRISTINA STEVENSON

When you think of raw land, it’s likely farming and ranching come to mind, but when you bought your acreage, did you really want to become a farmer or rancher? Maybe you just wanted enough land around your homestead or vacation property to enjoy the sounds and beauty of nature, far from road traffic, nosy neighbors, and the cacophony of the city. Now that you’ve got that, you may be reassessing ways your extra land can be used to make you money—besides waiting for slow value appreciation.

Despite what Will Rogers said about land, “Don't wait to buy real estate. Buy real estate and wait,” unimproved land does appreciate, but not as much as it would if you put it to some use. The question is, do you want passive or active income? You can generate passive income by leasing out some of your acreage to farmers to plant crops or livestock owners who can use your land to graze their sheep, goats, llamas, horses, and cattle.

You can also build storage facilities for rental at a cost of approximately $2 million for land, construction, permits, and fees, and with a rental rate of approximately $9 per square foot, you’ll soon turn a profit on an average of $184,500 annually, depending on the “size of your facility, the local market for storage rentals, and your operating efficiency.” Or, you can allow renters to do their own due diligence and build their own facility such as a fishery or a greenhouse for a long-term 50-year or 99-year lease.

Renewable energy from wind turbines or from solar energy panels is ideal on large plots of rural land for lease revenue. Lease the land to a power company and allow them to install the turbines or solar panels and handle the maintenance. 

It's a little more involved, but you can charge admission to others to use your land for recreation. This can include hunters, anglers, dirt bikers, trappers, skiers, hikers, cyclists, zipliners, bungee jumpers, rock climbers, horseback riders, campers, ATV riders, and others.

You should know that if you charge a fee for access to your land, you incur liability for others on your property and you should carry vacant land insurance, small business insurance, and hunter’s lease insurance, if applicable. For example, New Hampshire’s wildlife code states that the landowner has “no duty of care to make their land safe for entry or use,” because outdoor recreation by its very nature comes with risks. The exception is that you have to disclose “any dangerous conditions” such as an abandoned mine or well or unfilled manmade holes where someone could trip and fall. Just like homeowners’ insurance, vacant land insurance will cover medical bills, pain and suffering, lost wages, death benefits, and legal costs. But it doesn’t cover intentional injuries to anyone, workers employed by the landowner, or injuries to the landowner, spouse or dependents.

Building commercially on your land begins with the size, topography, and the type of business you’d like to have. Next is finding out about city/county zoning laws and if there are any restrictions to how you plan to use the land because of flood plains, airspace, protected wildlife, building codes, and easements.

According to San Mateo, California, zoning laws “protect the character and the social and economic stability of agricultural, residential, commercial, industrial, and other private and public areas within the County, and to assure the orderly and beneficial development of such areas.” Your city/county zoning department has a zoning map with ordinances that you can peruse. If what you’re planning for your property is restricted, you might be able to get a special use permit or variance, rather than pursuing a zoning change. You can file a written application for a fee, and then present your case to the zoning board during a hearing. Once you have approval for your project, you can start estimating the costs and construction timelines for building roads and acquiring utilities.

Hospitality projects are always welcome in an area with natural beauty and resources.

You can create a getaway for vacationers by building a cabin, lodge, a row of tiny houses (under 400 sq. ft with a bath, kitchen and sleeping area) or a retreat center for churches, youth groups, painters, and crafters and rent it out through Vrbo or special interest sites. Many groups enjoy unplugging and getting away to a new location to pursue their favorite hobby. You would just need to know what services they would need. For example, quilters require quite a large space, with numerous electrical outlets, spacious tables for cutting fabric, sewing, and ironing, and broad wall spaces to arrange fabric cuttings into patterns. Some groups want to do their own cooking, while others want a complete resort experience with fine dining services and housekeeping. 

You can create a camping ground or an RV park on your own or by joining a franchise such as KOA or Yogi Bear’s Jellystone Camp-Resorts. Keep in mind that zoning laws may restrict or limit the locations of mobile home parks, how long guests can stay, and require that there are roads, space, and parking requirements to accommodate the large sizes of buses and RVs—the latter of which can reach up to 40 ft. with slide-outs that create added living space. There also has to be enough room for some privacy between the motorhomes, typically 10 to 15 campsites per acre. You also want to provide camping facilities with fire pits and barbeques as well as activities for guests such as a hiking and horseback-riding trails, perhaps a swimming pool, convenience store, and a snack bar or restaurant. RVers appreciate having easy access to hookups for water, electricity, and sewer, as well as Wi-Fi, clean public restrooms and showers, and a place for special gatherings for family reunions, meetings, and planned activities for kids.

If you go the franchise route, KOA charges a $35,000 franchise fee, an annual admin fee of $1,750, 8% of camping registration revenue, and 2% of site registration revenue for advertising, and requires at least 75 RV sites and 90 total sites for start-up. Average costs are $3,300,000 to $4,600,000, including land purchases, which you won’t need to pay unless you are buying adjacent property to create a large camping or glamping resort.  

Whatever you choose to do, get the proper legal and commercial construction expertise to help you navigate your project to success.

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