When thinking about investing in real estate, bricks-and-mortars come to mind, but
the most basic real estate investment strategy has always been land investment. It is 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. 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.
Related: Is real estate a good investment?
What makes buying land an attractive option is the flexibility of location. Land can be used for residential real estate, commercial estate, farming purposes, or left to appreciate. Land as a real estate investment strategy is something you should consider if you have the resources and shrewdness to make it generate money.
6 Reasons to Buy Land
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. Developing land, however, is the least common because of its extreme costs, some develop land massive enough for commercial properties. A perfect example of that would be a small shopping mall.
- Farming and livestock: Many land owners 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 land owner, 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 lan, 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 sizes, 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
The major difference between owning land and residential property is that 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 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
Finally, is land owning a lot more expensive? Owning a vacant land has the lowest expenses in real estate investments because you avoid utilities, pay fewer taxes and fewer mortgages considering that you purchased an empty land.
Land as a real estate investment strategy is possibly one of the best options out of there for people who are not cut out for the hard work of 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 ca 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.