Characteristics of Land and Land Ownership

Land as a Natural Asset

Land can include anything that's on the ground, which means that buildings, trees, and
water are a part of land as an asset. The term land encompasses all physical elements,
bestowed by nature, to a specific area or piece of property—the environment, fields,
forests, minerals, climate, animals, and bodies or sources of water. A landowner may be
entitled to a wealth of natural resources on their property—including plants, human and
animal life, soil, minerals, geographical location, electromagnetic features, and
geophysical occurrences.

Because natural gas and oil in the United States are being depleted, the land that
contains these resources is of great value. In many cases, drilling and oil companies
pay landowners substantial sums of money for the right to use their land to access such
natural resources, particularly if the land is rich in a specific resource.

Among the Oldest Types of Collateral

Lenders are extremely attracted to land because it is one of the oldest forms of
collateral. But unlike a home or a car, for example, land cannot be moved, stolen, or
destroyed. Air and space rights—both above and below a property—also are included in
the term land. 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 its scarcity. Many investors who purchase land do so
with the intent of developing it, often for commercial or residential real estate
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. The associated risks of developing land can stem
from taxation, regulatory usage restrictions, leasing and selling a property, and even
natural disasters.