The real estate market may have cooled, but investor demand may soon be heating up for at least one type of property: land.

Some of the most attractive deals lately have come from land developers and home builders, who are divesting parcels in many parts of the country as they whittle down excess housing inventory. Even smaller landowners, facing their own financial strains, are selling off lots once meant for building.

“The time is ripe to start looking; I haven’t seen this market in 20 years,” said Jaime Raskulinecz, a real estate investor and property manager from Verona, N.J., who wants to buy land in the hard-hit market of Cape Coral, Fla. During a recent visit there, she found lots for sale on or near the water at about a third to half below their peak prices of two years ago.

On a larger scale, H. Ray Alcorn Jr., an owner of Park Real Estate in Blacksburg, Va., is picking up commercial and residential parcels after two years on the sidelines. Mostly using cash, he has bought more than 100 acres throughout Virginia this year, some from lenders and much of it at reduced prices, and he has options to buy more.

“I’m looking at a lot of stuff, and I’m being very picky,” he said, explaining that the land he buys generally has zoning and various building approvals in place, making it easier to develop or resell.

By some accounts, acquiring land is the purest form of real estate investing. (As Mark Twain once said, “they’ve stopped making it,” at least around these parts.)

Yet buying land, even at today’s prices, is not nearly as simple as it seems. Real estate experts raise many signals of caution, particularly for the neophyte investor.

“Because everyone’s running away, some people think it’s time to invest, but it’s not for the faint of heart,” said C. Joseph Blackbourn, the president and chief executive of Everest Holdings in Scottsdale, Ariz., an active buyer of home-building lots in the Southwest since late last year. “There are a lot of expenses in holding land.”

Land investors will need to have cash on hand to cover most of those expenses. “Lending has all but disappeared,” said Joel B. Shapiro, the chief executive of Timbervest, an Atlanta investment company that manages about 900,000 acres of timberland nationwide. Just as the credit crisis has made terms on home mortgages more stringent, land loans, already deemed riskier by lenders, are harder to get and typically carry even higher down payments and interest rates.

So what are some of the other costs associated with land ownership, besides high borrowing expenses? There are property taxes, of course, and there may be liability insurance (in case someone is injured on the property) and maintenance expenses (to cut the grass or provide other upkeep).

Owners will also need to ensure that the land is environmentally safe. Sometimes toxic trash may be dumped on the property “unbeknownst to you, and you’ll be responsible for the cleanup,” said John T. Reed, the publisher of Real Estate Investor’s Monthly, a newsletter. “At 2 o’clock in the morning on a moonless night, who’s to say what’s being put there?”

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