Q: My wife and I are considering purchasing some raw land for investment purposes. Can you give me any suggestions, things to look for, and whether or not we will be able to write off the interest (tax form 4922 ?).
A: The same things apply for raw land as for any investment/property purchase: Location, location, location and then price. You have to figure out the future use of the property, how much it will cost you to hold it, and when you will sell or build. Typically, I don’t suggest buying raw land unless you intend to build on it within the next 6 months to a year, because things can change. But if it’s simply an investment, then that time line can be extended. But work it out ahead of time, and consider all of the pitfalls (does the land have environmental contamination that would be expensive to remove; flood plain; will a road be built near, on or next-to the property, etc.).
As for writing off the interest, you may do that as well as write off the cost of property taxes and other expenses in maintaining the property. If there is income (like grazing rights), you’d offset the income against the expenses.
Consult with your tax advisor for more details. Good luck!
Jan. 1, 2004.