Is Buying Land a Good Investment? Honest Answer for 2026

U.S. farmland has appreciated at a 5.8% compound annual rate over the last five years, hitting $4,350 per acre nationally in 2025 according to USDA Economic Research Service data. And in the Austin metro, Hays County land values have surged at nearly 48% annually over the same period. Those are real numbers. But they hide a whole lot of nuance that could cost you serious money if you’re not paying attention.

So is buying land a good investment? The honest answer is: it depends entirely on what kind of land, where it sits, and what your plan is. I know that sounds like a cop-out, but by the time you finish this article you’ll know exactly how to evaluate a specific parcel and decide for yourself. Lets get into it.

I’ve been a broker in Austin since 2007 and my family has been in Texas land deals going back to the 1970s. My grandfather started assembling parcels in Houston that eventually became about 100 acres and 960 individual lots. It took decades. But the payoff was generational. That experience taught me something most people learn the hard way: land can be an incredible investment, or it can be a black hole where your money sits doing absolutely nothing for 20 years. The difference comes down to a few things I’ll walk you through below.

Land Appreciation: What the Data Actually Shows

Lets start with the numbers because the numbers matter more than anyone’s opinion (including mine).

According to USDA data, U.S. farmland averaged $4,350 per acre in 2025. That’s up 4.3% from 2024. Adjusted for inflation, the real growth rate was about 1.9% per year over the last five years. Not bad right. But not exactly lighting the world on fire either.

Now compare that to the S&P 500, which has averaged roughly 10% annually since 1928. Or residential real estate, which has appreciated at about 4.3% per year from 1991 through 2024. On raw numbers alone, land looks like the worst of the three.

But here’s where it gets interesting. Those are national averages. And national averages are basically useless when you’re evaluating a specific piece of dirt in a specific market. In the Austin metro, development stage land near growth corridors is averaging $10,200 per acre statewide, with retail-ready tracts near highway expansions approaching $38,000 per acre. That’s a completely different conversation than a 40 acre plot three hours from the nearest Walmart.

Benjamin Graham (the guy Warren Buffett calls his greatest teacher) wrote about the difference between investing and speculating. His whole framework was about understanding what you’re buying and why. Land is probably the clearest example of that distinction in all of real estate. Buy the right parcel in the path of progress and you’re investing. Buy a random lot because it was cheap on the internet and you’re speculating. Big difference.

When Buying Land IS a Good Investment

Not all land is created equal. Here are the scenarios where I’ve seen land deals work out really well, both personally and for clients.

Path of Progress

This is the big one. When a city is growing in a specific direction and you buy land in that path before the development arrives, you can see returns that make the stock market look boring. The I-35 corridor between Austin and San Antonio is a perfect example right now. Between 2020 and 2024 the Austin metro added roughly 200,000 new residents. That growth has to go somewhere right. And it’s pushing south toward Kyle, Buda, and San Marcos. If you bought 10 acres in Hays County five years ago, you’re sitting on something that’s appreciated at a pace that would make a hedge fund manager blush.

But you have to get the timing and location right. And that means understanding zoning, utility access, and what the city’s capital improvement plans look like. If you don’t know how to read a comprehensive plan, you’re guessing. And guessing with six figures on the line is not a great strategy.

Infill and Rezoning Plays

Austin’s Phase 2 zoning reforms (approved May 2024) cut the minimum lot size from 5,750 square feet down to 1,800. That unlocked a ton of marginal sites that previously had zero development potential. If you owned a half acre lot that used to be zoned for a single family home, suddenly you might be able to subdivide into three buildable lots. That’s not appreciation. That’s value creation. And it’s one of the smarter ways to invest in land if you understand the regulatory environment.

Land You Can Use While You Hold

Agricultural exemptions in Texas can reduce your property tax burden dramatically. If you buy 10+ acres and run cattle on it (or bees, or hay, whatever qualifies), you’re holding an appreciating asset while paying next to nothing in taxes. That changes the math completely compared to paying full property tax rates on a vacant lot inside city limits.

I wrote a more detailed guide on this for the Texas Hill Country specifically if that’s the area you’re looking at. And if you’re new to real estate investing in general, that hub page is a good starting point for the bigger picture.

When Land is NOT a Good Investment

Ok so here’s the part where I’m going to be more honest than most people in my industry want me to be. There are a lot of situations where buying land is a terrible idea and I’ve seen people lose money doing it. Not because land is inherently bad, but because they didn’t understand what they were getting into.

Remote Land with No Utilities

That gorgeous 20 acre tract in West Texas with mountain views and a $15,000 price tag? There’s a reason it costs less than a used car. No water, no electricity, no sewer, no road access, and no realistic path to getting any of those things without spending $50,000 to $100,000 or more. The land might be free at that point and you’d still lose money developing it.

If you’re looking at raw land investing, utility access is probably the single most important factor to evaluate. Everything else is secondary.

Speculative “Land Banking” with No Exit Plan

I talk to people who bought land 10 years ago because “Austin is growing” and they figured they’d just hold it and sell for a profit eventually. Some of them are sitting on parcels that are worth exactly what they paid for them, minus 10 years of property taxes. Growth doesn’t guarantee your specific parcel will benefit. It has to be the right kind of growth in the right direction with the right zoning to actually reach your property.

Gary Keller wrote in The Millionaire Real Estate Investor that the best investments are the ones where you understand the fundamentals before you buy, not after. Sounds obvious. But with land, people skip the due diligence step constantly because the price seems so low that the risk feels manageable. It’s not. A $30,000 mistake that takes 10 years to realize is still a $30,000 mistake.

Land as Your Only Investment

Land produces zero income while you hold it (unless you’re leasing it or running an ag operation). Zero. No rent checks, no dividends, nothing. Every month you own it, you’re paying property taxes, possibly insurance, possibly a loan payment with interest. It’s pure negative cash flow.

Compare that to a rental property that (even modestly) cash flows $500 a month while also appreciating. Or a stock index fund that throws off dividends and compounds. Land only makes money in one direction: the sale price. If you’re putting all your investment eggs in the “I’ll sell it for more later” basket, you better be very confident in that bet.

The Holding Costs Nobody Tells You About

This is the section that separates people who’ve actually invested in land from people who just read about it online. The purchase price is only the beginning.

Property taxes. Even vacant land gets taxed. In Travis County you’re looking at roughly 1.8% to 2.2% of assessed value annually depending on your taxing jurisdictions. On a $200,000 parcel that’s $3,600 to $4,400 per year. Every year. Whether the land goes up, down, or sideways. For a deeper dive into how property taxes work here, check out our Austin property tax guide.

Land loan costs. Banks don’t love lending on vacant land. You’re typically looking at 15% to 20% down (sometimes more), interest rates 1 to 2 points above conventional mortgages, and shorter amortization periods. Some lenders want a balloon payment after 5 to 10 years. That’s a real cost that compounds quietly while you’re waiting for appreciation.

Maintenance and liability. Depending on jurisdiction you may need to mow, control brush for fire safety, maintain fencing, or deal with trespassers and dumping. There’s liability insurance to consider too. None of this is expensive individually but it adds up over years.

Opportunity cost. This is the one people never calculate. If your $200,000 is sitting in vacant land appreciating at 3% a year, and the S&P 500 is averaging 10%, you’re losing 7% annually in opportunity cost. Over 10 years that’s the difference between $200,000 becoming roughly $260,000 (land) versus $518,000 (stock market). I’m simplifying, sure. But the gap is real and it matters.

Land vs Stocks vs Rental Properties

I’m not going to make a pretty table comparing these three because the reality is messier than any table can capture. But lets at least lay out the honest trade-offs.

Stocks (S&P 500). Average 10% annual return over the long run. Completely liquid, you can sell in seconds. Zero maintenance. No property taxes. But you have zero control over the outcome and the volatility can be stomach-churning. The S&P dropped 37% in 2008 and 18% in 2022. Could you sit through that without selling? Most people say yes. Most people are lying.

Rental properties. Average 4-5% appreciation plus cash flow plus tax benefits (depreciation, mortgage interest deduction, potential capital gains exclusion). You have real control. But you’re also dealing with tenants, maintenance, property management, and the general headache of being a landlord. It’s work. If you want the details on what that looks like in this market check out our guide on investment property in Austin.

Land. Potentially high appreciation in growth corridors. Very low maintenance (compared to a rental). Simple to own. But zero cash flow, limited tax benefits, harder to finance, and much less liquid. Average time to sell vacant land is 6 to 12 months nationally and rural Texas acreage averages 224 days on market. Try telling your financial advisor you need to liquidate your land by Friday. It’s not happening.

So which one wins? None of them. They all have a role and the best investors I know use a mix. But if someone is telling you land is “always” a great investment, they’re either selling you something or they haven’t done the math. Either way that’s your cue to slow down and think.

How to Evaluate a Specific Parcel

If you’ve read this far and you’re still interested (good, you should be), here’s the framework I use when evaluating land deals. This is the same process whether I’m looking at something for myself or advising a client.

1. Location relative to growth. Where is the nearest city growing? Which direction? How fast? Check the city’s comprehensive plan, look at capital improvement projects (road expansions, new water/sewer lines, school construction). If infrastructure is heading toward your parcel, that’s a strong signal. If it’s heading the other direction, that’s a problem.

2. Utility access. Is there water? Sewer or septic capacity? Electricity? Gas? Internet? Every utility you’d have to bring to the property is a cost you need to add to your purchase price. I’ve seen $40,000 parcels that needed $80,000 in utility work to become buildable. That’s a $120,000 lot, not a $40,000 bargain.

3. Zoning and entitlements. What can you legally build on the property today? What could you potentially get it rezoned to? A 5 acre tract zoned agricultural in the path of residential development has enormous upside. The same tract zoned agricultural in a floodplain has basically zero upside. Zoning is everything.

4. Access and topography. Does the parcel have road frontage? Is there legal access? What’s the terrain like, flat, sloped, rocky, wet? Steep topography adds massive development costs. Poor drainage can make a parcel unbuildable. These aren’t details you can evaluate from a listing photo.

5. Title and survey. This is where people get burned. Easements, mineral rights, liens, boundary disputes. I cannot stress enough how important it is to do proper due diligence before closing on any land deal. Our land due diligence checklist walks through every single thing you need to verify.

6. Realistic exit strategy. How are you going to make money? Hold and sell to a developer in 5 years? Subdivide and sell lots? Build and sell? Use for ag income while it appreciates? If your only answer is “it’ll go up” you don’t have a strategy. You have a hope.

The Tax Reality for Land Investors

I want to be careful here because tax stuff gets complicated and I’m not a CPA. But there are some basics every land investor should understand.

Property tax and mortgage interest on land held for investment are deductible. That’s the good news. The bad news is that under current tax law (through 2025, potentially extended), a lot of the other carrying costs you’d want to deduct, like legal fees, travel to inspect the property, accounting fees, insurance, are classified as miscellaneous itemized deductions and those are currently suspended. So you’re eating those costs.

You can choose to capitalize carrying costs instead of deducting them, which adds them to your cost basis and reduces your taxable gain when you eventually sell. That might make sense if you’re in a low tax bracket now and expect to be in a higher one later. Talk to your CPA about which approach works for your situation.

One thing worth mentioning: land does not qualify for depreciation. Unlike a rental property where you can depreciate the structure over 27.5 years, there’s nothing to depreciate on bare land. That’s a real tax disadvantage compared to improved real estate.

And 1031 exchanges? Yes, land qualifies. If you sell investment land and reinvest the proceeds into another investment property (land or otherwise) within the IRS timelines, you can defer the capital gains tax. That’s actually one of the strongest plays for land investors who’ve seen significant appreciation. Sell the land, exchange into a cash flowing rental property, and now your money is working for you instead of just sitting there.

The Liquidity Reality Check

I saved this for near the end because it’s the thing most people underestimate the most. Land is illiquid. Really illiquid.

When you own stocks and need cash, you open an app and sell. When you own a rental house and need to sell, you list it and you’re probably under contract in 30 to 60 days in most markets. When you own vacant land and need to sell? Buckle up.

National averages put vacant land at 6 to 12 months on market. Rural acreage in Texas averages 224 days. And that’s at market price. If you need to sell quickly you’re probably taking a 20% to 30% discount to attract a cash buyer.

The buyer pool for vacant land is tiny compared to residential real estate. Most people can’t finance vacant land easily (remember those land loans aren’t cheap or easy to get). So you’re often dealing with cash buyers, developers, or people willing to do owner financing. That’s a small pool.

This doesn’t mean land is bad right. It just means you should never put money in land that you might need back in a hurry. This is patient money. Generational money. My grandfather’s Houston land project was a 40+ year play. If you need liquidity, land is not where your capital should be. Period.

The Bottom Line

Is buying land a good investment? It can be. But only if you treat it like what it actually is: a long-term, illiquid, zero-income asset that bets entirely on appreciation and your ability to identify the right location at the right time. That’s not a bad bet if you do your homework. It’s a terrible bet if you don’t.

The best land investments I’ve seen (and been a part of) have a few things in common. They were in the path of documented growth. They had clear utility access or a realistic path to it. The buyer understood the zoning and regulatory environment. And most importantly, the buyer had patient capital and wasn’t counting on a quick flip.

If you’re considering a land deal in the Texas Hill Country or greater Austin area and want an honest assessment of whether the numbers work, reach out to me. I’ll walk you through the same framework I use for my own portfolio. No pitch, just math.

And if you’re building a broader real estate investing strategy, land might be one piece of the puzzle. But only one piece.

Be safe, be good, and be nice to people.