How to Generate Income From Vacant Land

Vacant land can transform into a valuable source of income. By exploring different avenues, landowners can convert unused property into a financial asset.

Generating Income Through Leasing

Leasing vacant land offers consistent income without relinquishing ownership. This involves granting others the right to use the property for specific purposes in exchange for payments.

Agricultural Leases

Agricultural leases are common for farming activities such as cultivating crops or grazing livestock. These agreements often involve cash rent (fixed amount per acre) or a crop-share arrangement (percentage of the harvest). Landowners report this rental income on IRS Form 4835.
Leases can extend to specialty crops or timber harvesting. For timber, a long-term agreement allows a forestry company to manage and harvest trees, providing periodic income.

Recreational Leases

Recreational leases provide seasonal income for outdoor activities. This can include leasing for hunting, fishing, or camping, where individuals or groups pay for exclusive access during specific seasons. These leases often stipulate rules regarding land use to protect the property.

Commercial Leases

Commercial leases leverage strategic locations for business purposes, offering higher and more stable income streams. Billboards can generate monthly income ranging from $500 to $2,000, depending on traffic visibility and location. Cell tower leases provide $750 to $2,000 per month in rural areas and $2,000 to over $4,000 in urban or high-demand locations.
Large tracts of land may be suitable for solar farm leases, where energy companies pay for the right to install solar panels, offering long-term agreements. The income from these commercial leases is generally reported on Schedule E of IRS Form 1040.

Storage Leases

Storage leases offer a way to generate income by providing space for vehicles or temporary containers. Landowners can lease out portions of their vacant land for RV, boat, or car storage, especially in areas with limited residential parking. Temporary container storage for construction sites or moving companies can also provide a consistent revenue stream. These arrangements often require minimal infrastructure.

Generating Income Through Direct Sale

Selling vacant land outright provides a lump sum rather than recurring payments. The value of the land is influenced by its location, current zoning regulations, and access to essential utilities. The sales process generally involves engaging a real estate agent and working with a title company. Upon sale, any profit realized is subject to capital gains tax.

Subdividing Land

Subdividing a larger parcel into smaller, more marketable lots can increase the overall revenue from the sale. For example, a 10-acre parcel might sell for a certain amount as a single unit, but dividing it into five 2-acre lots can yield a higher cumulative sale price. This process typically involves surveying the land to create new property lines and may require local government approval.

Owner Financing

Offering owner financing can broaden the pool of potential buyers. In an owner-financed sale, the seller acts as the lender, accepting a down payment and then receiving installment payments with interest over an agreed-upon period. This strategy can lead to a higher total return over time due to the interest collected. Owner financing can also spread out the capital gains tax liability over several years, as the gain is recognized proportionally to the principal payments received.

Generating Income Through Business Ventures

Operating a direct business venture on vacant land involves a more active role from the landowner. These ventures require initial investment and ongoing management but can yield substantial returns. The type of business venture suitable depends heavily on the land’s characteristics, location, and the owner’s willingness to manage operations.

Campground or Glamping Site

Establishing a campground or glamping site is a popular business venture, capitalizing on the growing demand for outdoor recreation. This involves developing designated camping spots, which may range from primitive tent sites to luxurious glamping accommodations. Revenue is generated through nightly or weekly rental fees for each site.

Self-Storage Facility

Developing a self-storage facility is a viable business model, particularly on land located near residential or commercial areas. This venture involves constructing storage units of various sizes or placing portable storage containers on the property for rent. Customers pay monthly fees for secure storage space, providing a recurring income stream.

Event Venue

Vacant land can be an event venue, hosting a range of activities such as weddings, festivals, concerts, or corporate retreats. This requires preparing the land to accommodate large gatherings, potentially including basic infrastructure like temporary restrooms, parking areas, and power access. The income is generated by charging venue rental fees for each event.

Community Garden or Urban Farm

Creating a community garden or urban farm allows landowners to generate income while providing a valuable community service. This can involve leasing out small plots of land to individuals or groups, charging an annual or seasonal fee per plot. Alternatively, the landowner can operate an urban farm, growing and selling produce directly to consumers or local restaurants. Income from these active business operations is generally reported on Schedule C of IRS Form 1040.

Parking Lot

Operating a parking lot can be an effective way to generate income from vacant land, especially in high-demand areas like urban centers, near event venues, or public transportation hubs. This involves preparing the land for vehicle parking, which may include grading, graveling, or paving, and implementing a system for collecting fees. Revenue is generated through hourly, daily, or monthly parking fees.