Is Kentucky Land a Good Investment?

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Is Kentucky Land a Good Investment?
By

Bart Waldon

Kentucky is known for its rolling bluegrass pastures, thoroughbred horses, bourbon distilleries and scenic landscapes. As a mid-south state, it enjoys pleasant weather for much of the year without extreme winters or summers. With low taxes, affordable real estate and a business-friendly environment, Kentucky can be an appealing place to live, work and invest.

When considering land investment in Kentucky specifically, there are several factors to weigh regarding the market conditions, risks and potential returns. This article provides an in-depth look at the pros and cons of buying Kentucky land as an investment.

Key Details About Kentucky's Local Real Estate Market

Kentucky real estate, especially in more rural areas, remains relatively affordable compared to national averages. The median home price in Kentucky as of November 2022 was $185,000, while the median price per acre for vacant rural land was $2,900.

Major cities like Louisville and Lexington have higher home prices, with median sale prices over $250,000. But smaller towns and countryside regions offer lower entry costs for vacant plots or farms.

Overall, real estate experts forecast steady but modest appreciation in Kentucky property values over the next few years. This makes the state potentially attractive for investor buyers able to purchase at good values today.

Factors That Support Buying Kentucky Land as an Investment

There are a few appealing reasons why purchasing Kentucky land can be a smart investment, especially for certain types of buyers.

1. Long-Term Development Potential

While Kentucky is still predominately rural, major cities like Louisville are growing rapidly. This expanding development means there is ongoing demand for land on the suburban fringes and in outlying counties around larger metro regions. Land near cities can greatly increase in value over 5-10 year time spans.

2. Agricultural Use Value

Kentucky has a strong agricultural industry, leading the nation in tobacco production and also supporting thoroughbreds, cattle, poultry and crops like corn and soybeans. The state offers good climate, terrain and infrastructure for farming. Agricultural land generally holds value well compared to residential or commercial uses.

3. Recreational Appeal

With beautiful scenery, lakes, wildlife areas and parks, Kentucky attracts tourists and transplants drawn to its natural assets. Land with hunting potential or access to recreational lakes and trails can target these buyers and investors. Distilleries and wineries also boost agritourism.

4. Low Property Taxes

Kentucky has one of the lowest real estate tax burdens in the U.S. Property tax rates average just 0.86% of assessed value statewide. This keeps carrying costs down for landowners and investors once a property is purchased.

Factors to Consider When Buying Kentucky Land

While Kentucky land investment has its appeal, there are also drawbacks and risks to evaluate before purchasing property in the state.

1. Overall Slow Appreciation

Outside of the major cities, property values in Kentucky have lagged national averages recently. Prices are just now rebounding from the 2008 recession. So, while land can be inexpensive to buy, returns on investment may take longer.

2. Higher Vacancy Rates

Development is uneven across Kentucky, and more rural areas have lost population over the decades. Some smaller towns struggle with empty storefronts and homes. Thus, the pool of potential tenants or buyers for properties can be smaller. Perform careful market research before investing.

3. Environmental Issues

Coal mining and tobacco farming have left some areas of Kentucky with contaminated land or water. Make sure to assess environmental risks and remediation costs on any property. Land quality directly affects pricing and returns.

4. Property Management Challenges

Managing remote investment properties or farms takes extra time and travel in Kentucky’s fragmented landscape. Local partnerships are recommended for overseeing land rentals, sales, maintenance issues and more. Property management costs eat into ROI.

Best Locations and Uses for Kentucky Land Investment

Not all Kentucky land deals are created equal when it comes to investment outlook. Depending on your strategy and capabilities as an investor, some locations and property uses show greater potential.

Suburban Land Near Growing Cities

Areas outside Louisville, Lexington, Bowling Green and northern Kentucky’s Cincinnati suburbs continue developing new housing, shopping and businesses. As long as infrastructure like roads and utilities expand too, the future looks bright in these growth corridors.

Agricultural Land with Diverse Uses

Seeking cropland, cattle pasture or horse farms with soil and climate flexibility helps buffer market swings in any single commodity. Central Kentucky’s limestone-rich Bluegrass Region allows for diverse agriculture.

Recreational and Lifestyle Property

Land and farms with good hunting, lakes, scenic hills or access to popular attractions like bourbon distilleries or Churchill Downs can draw higher-paying recreational buyers. Improvements like cabins or event facilities also boost value.

Land with Mineral Rights or Resort Potential

Western Kentucky overlies coal, oil and gas deposits that can be leased out profitably if market prices rise. And forested tracts near state resort lakes lend themselves to campground or hospitality development if zoning allows.

5 Bottom Line Factors in Deciding if Kentucky Land is a Good Investment

Considering this mix of upsides and challenges to buying Kentucky property as an investment, here are five essential questions to ask that shape the decision:

  1. What future local growth and infrastructure expansion is happening nearby? Target land in metro suburbs and counties with more progress.
  2. Does the property support one or more income uses now? Seek at least some interim rental potential before development.
  3. Can proper due diligence assess environmental risks ahead of time? Don’t get stuck with cleanup bills down the road.
  4. Is professional property management available if needed? Line this up for remote parcels.
  5. Does the purchase price allow room for long-term gains? Don’t overpay even if finances are easy. Patience pays off.

While Kentucky real estate appreciated slower than other areas recently, the market fundamentals and low costs still make certain land investments here worthwhile - especially if you buy smart.

Working With a Local Professional is Key

Navigating all the site-specific nuances around Kentucky land opportunities takes local market experience. Land Boss has specialized in buying, selling and investing in Kentucky property for over 5 years.

The Land Boss team brings on-the-ground insight across the state when assessing land deal potential. They purchase properties directly for cash, allowing motivated sellers an easier exit option. And their professional partners can assist investors with everything from site evaluations to property management down the road.

Final Thoughts

Kentucky offers beautiful scenery, a low cost of living and business-friendly advantages that will continue attracting residents and investors alike. While its real estate market appreciated slower than national trends, robust growth around major cities and low purchase prices still present opportunities. Savvy investors who target the right land parcels in terms of location, use and management can achieve solid long-term returns. Working with local experts helps navigate Kentucky’s uneven terrain and find those golden land investment deals. With proper due diligence and patience, the Bluegrass State provides fertile ground for strategic property buyers to cultivate steady gains over time. The natural appeal and development potential make Kentucky a place where vacant land can ultimately pay off as a smart addition to an investment portfolio.

Frequently Asked Questions (FAQs)

What types of land appreciate fastest in Kentucky?

Land near growing metro areas like Louisville and Lexington generally gains value quickest as development expands outward. Property set-up for recreational uses also sees strong demand from lifestyle buyers.

What is the minimum investment needed to buy Kentucky land?

High-quality parcels can still be found for under $50,000 depending on acreage and location. Investors able to pay cash can access deals below market rates as well. Minimum investments vary greatly.

Should I purchase land in Eastern vs. Western Kentucky?

Western Kentucky has more agricultural potential with its fertile soil, flatter terrain and higher rainfall. But economic growth favors central Kentucky near Lexington and Louisville plus northern suburbs closest to Cincinnati. Perform local market research before deciding.

Is leased farmland or timberland a good investment option?

Both crop and timber leases can generate annual income from Kentucky rural land while awaiting better sale or development opportunities down the road. Seek help setting up leases.

What professional help is most valuable for researching and managing investments?

Experienced local real estate agents provide critical insights on pricing and demand when identifying potential deals. Property managers then assist out-of-town buyers with overseeing rentals, maintenance issues or sale prep once purchased.

About The Author

Bart Waldon

Bart, co-founder of Land Boss with wife Dallas Waldon, boasts over half a decade in real estate. With 100+ successful land transactions nationwide, his expertise and hands-on approach solidify Land Boss as a leading player in land investment.

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