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Land Ownership

On Behalf of | Sep 19, 2022 | Land Use |

Owning land in Florida is a bit different from other types of investment. It has different tax treatment, and it also comes with the possibility of developing the land in some way by adding buildings or landscaping it.

Investing in land

Land is different from an asset like a car, because the IRS does not consider it to be something that can depreciate. It is a “fixed asset”, which means it is illiquid and not easy to convert into cash. Purchasing land generally entitles to the owner to all of the natural assets on and under the land, such as buried resources. There are environmental restrictions on land, especially on bodies of water that pass near or through land, but owners can work within those restrictions to build housing or any other kind of development.

Using Land

In addition to building on land and selling or renting the development, the owner of land can borrow against it and use it as collateral. Land can’t be moved or hidden, and it has no depreciation, so lenders are usually willing to accept land as collateral. Land use can include camping, hunting and other forms of recreation as well. That combination of flexible ways to use the asset and its power as collateral make land highly attractive. However, the fact that land is illiquid and sometimes difficult to sell means it is not easy to cash out and use it for short-term needs.

There are a broad set of reasons to invest in and own land. Its tax treatment, use as collateral, and use in development make it attractive.