When thinking about investing in real estate high-rise apartments and mansions come to mind. However, the most basic real estate investment strategy has always been investing in land. It’s a raw investment; it gives you the ability to start something from scratch and to build basically anything you desire. Alternatively, it gives someone else the opportunity to build something on your land.
Land as a real estate investment strategy is the best option for people who are not cut out for the hard work of managing residential real estate properties. The misconception about purchasing a piece of land is that it generates no money, it won’t have a rising value, and that is generally undesirable. According to landowners, these are huge misconceptions. There are so many financial and managerial benefits to buying land.
Here are the reasons why you should invest in land real estate.
1. Versatility and options
Land can be used for so many options that will suit basically anyone’s needs and ambitions.
- Residential and commercial buildings: The idea is that you can basically rent, sell or even develop the land depending on your financial expectations and ability. Renting out the land and allowing a residential building to be constructed means you’ll be getting a steady income and increase the land’s value because of the property built. Selling the land to commercial or residential investors for added value after some years is another option.
- Farming and livestock: Many landowners who buy their estate in rural or suburban areas have the attractive option of renting it out for many years for farming purposes. This serves two main purposes for a landowner, generating money from rent and from appreciation.
2. No depreciation
The fact that land has no depreciation value is another reason that makes it a great real estate investment strategy. Land can’t have a depreciation value because simply it can’t be destroyed, moved, or affected negatively under any circumstances, natural or unnatural. So when investing in land, an investor is able to rely solely on appreciation, worst-case scenario.
3. No competition
This is a true fact because lands are different in size, location, and even shape that you can never find the same exact land. Compare that to property owners who have to work hard to fight off competition in their market. If you are going to buy land, then you will find it easier to acquire it without going through the process of bidding with other competitors.
4. Limited management issues
Land doesn’t need any maintenance or attention while properties require a lot of work and time. To be profitable in land purchasing, the most important criterion is that the land has to be suitable for construction. For investors who are too busy to deal with tenants, maintenance, and managerial issues, then the land is a great strategy for making money in real estate passively.
5. Land is scarce
The thing about land ownership is that you will be the owner of an investment that is considered limited or rare. We are running out of land. With overpopulation around the world, empty lands are becoming even more limited with every passing year.
6. Cheaper expenses
Owning vacant land has the lowest expenses in real estate investments because you avoid utilities, pay fewer taxes and fewer mortgages considering that you purchased empty land. Land as a real estate investment strategy is the best option for people who are not cut out for the hard work of managing residential real estate properties. The huge risk that lies with buying land is the consequence of not being able to rent out the land.
As with any real estate investment, vacancies hurt profits and cash flow. Moreover, if the land was bought with the intention of having a tenant build a property, then you will have to construct a property to rent, which is very costly. Another risk that can come with land purchase is the extreme shifts in value – the value rates can rise extremely slowly or sky-rocket in a week. Nevertheless, if you are looking to add into your dimension of investments with something new, then land ownership is the thing for you.
