What is 'Land'

Land is real estate or property, minus buildings and equipment, that is designated by fixed spatial boundaries. Land ownership may offer the title holder the right to natural resources on the land. The traditional school of economics dictates that land is a factor of production, along with capital and labor. The sale of land results in capital gain or loss; under IRS tax laws, land is not a depreciable asset.

BREAKING DOWN 'Land'

The term land can be looked at in a number of ways, with its definition viewed differently depending on the circumstances under which it is analyzed. The basic concept of land is that it is a piece of earth, namely a piece of property that has an owner.

A more delineated concept of land, the legal concept of land, is that it is a factor of some form of production, and though it is not consumed during this production, no production would be possible without it. Land is, therefore, a resource with no cost of production. Despite the fact that land use can be altered from less to more profitable, its supply cannot be increased.

Characteristics of Land and Land Ownership

In terms of being an asset, land includes anything that is on the ground, which means buildings, trees and water are a part of land as an asset. The term land is inclusive of all physical elements, bestowed by nature, to a specific area or piece of property. This includes environment, fields, forests, minerals, climate, animals and bodies or sources of water. There is a wealth of natural resources that may be present on a property or piece of land that the owner, or title holder, may be entitled to. This includes plants, human and animal life, soil, minerals, geographical location, electromagnetic features and geophysical occurrences. Depletion of various natural resources in the United States, specifically natural gas and oil, is of great value, and drilling and oil companies, in many instances, pay landowners substantial sums of money for the right to use an owner's land to access such natural resources, as well as shell out small fortunes for large acreages of access, specifically if the land is rich in a specific resource.

Lenders are extremely attracted to land because it is one of the oldest forms of collateral and because it cannot be moved, stolen, wasted or destroyed. Air and space rights are also covered by the term, meaning all air and space above and below the property is part of the term; however, the right to use the air and space above land may be subject to height limitations dictated by local ordinances, as well as state and federal laws.

Investing in Land for Development

Land's main economic benefit is scarcity. Many investors who purchase land do so with the intent of developing it, often for real estate, such as commercial or residential developments that are subject to zoning ordinances. Investing in raw land can produce significant future cash flows that are easy to predict once secured, but developing land can be very costly and uncertain. Associated risks can stem from taxation, regulatory usage restrictions, leasing and selling the associated land, and even natural disasters.

RELATED TERMS
  1. Land Value Tax - LVT

    A tax on the value of a piece of land. Land value tax inherently ...
  2. Littoral Land

    Littoral land includes land refers to land that is situated ...
  3. Land Flip

    A land flip is when a group of buyers trade a piece of land amongst ...
  4. Just Compensation

    Just compensation refers to compensation individuals receive ...
  5. Ground Rent Arrangement

    A situation in which someone owns a structure but not the land ...
  6. Stamp Duty Land Tax (SDLT)

    A stamp duty land tax (SDLT) is the tax imposed by the UK Government ...
Related Articles
  1. Investing

    Top 4 things that determine a home's value

    Your house depreciates over time, while the land beneath it is likely to do the opposite. Here are the top determinants of your home's value.
  2. Insights

    What To Do When The Government Wants Your Land

    Find out how the government evaluates your land, what your options are and how to get the most from it.
  3. Managing Wealth

    The Top 5 States Where Retirees Can Buy Cheap Land

    Buying vacant land for future gain is high-risk. Look for low prices in undeveloped areas likely to see a building boom in the near future. Here are five.
  4. Investing

    4 Difficult Places For Foreigners To Buy Real Estate

    Buying property in the U.S. can be a difficult process. Buying internationally can be even worse, especially in these four countries.
  5. Investing

    How to make money in real estate

    If you're interested in the real estate investment, check out these factors that will affect your investment return.
  6. Investing

    Now’s The Time To Buy The Land Drillers

    As both natural gas and oil drilling activity continues to increase onshore, the land drillers will benefit. For investors, the firms doing the heavy lifting continue to see rising rig counts ...
  7. Investing

    Should You Buy Property on Leased Land?

    Find out what to consider before investing in a leased-land property.
  8. Managing Wealth

    Buy a House in the Philippines: A How-To Guide

    Foreign-ownership regulations make it a little tricky, but plan right and you can have a home in paradise.
  9. Investing

    Getting in On the (Next) Texas Oil, Gas Land Boom

    Landowners enjoyed rich royalties from their oil- and gas-producing plots. But how can the rest of us hitch a ride on the next boom?
  10. Investing

    4 ways to value a real estate property

    Here are several approaches to evaluate real estate properties for investment purposes.
RELATED FAQS
  1. If a telecommunication company wants to build a tower on my land how much should ...

    Get help in understanding how much income it is possible to receive for leasing land to a telecommunications company for ... Read Answer >>
  2. What are the differences between investing in real estate and stocks?

    Invest in real estate by purchasing physical property or buildings, or invest in stocks by buying a claim to a company and ... Read Answer >>
Hot Definitions
  1. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  2. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  3. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  4. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  5. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  6. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
Trading Center