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Land Investment
Land Investment: Is it really a good idea to invest in land?
You have thought about owning your own car and house and investing in the stock market, but why not try staking a claim to a piece of land?
During an upswing in development, land appreciates faster than buildings. If you have enough capital to invest in land, now is a good time to invest in vacant office and industrial-zoned land, as land shortages and low vacancies in existing buildings drive values up, according to property experts.
In other words, during an upswing phase in office and industrial property such as what is happening now in many places, land appreciates much faster than developed properties.
The difficulty lies in the shortage of zoned office and industrial land. It is very good to bank in land, if you can find it. The residential market, on the other hand, is fully priced and you do not – as a rule – buy an asset that is fully priced.
Residential property prices should grow at about the consumer price index inflation rate for the next number of years. Therefore, office and industrial-zoned land is a good investment. Land values are skyrocketing for all types of commercial land.
The value of industrial-zoned land has risen 300% in the past 18 months in many parts of the world. This applies to zoned retail, commercial and industrial land. All three sectors have seen enormous growth in value.
Investment properties have not increased in value as much as vacant zoned land. The reason for the increase in the value of zoned land is due to the low vacancy levels in existing buildings and also the shortage of supply of land which is ready to be developed.
It can take up to 18 months or more to rezone land from agricultural or residential to other uses, whilst the demand for zoned land is such that developers are not able to wait that length of time and therefore require land that is already correctly zoned.
These factors have put upward pressure on land values. The increasing rentals in all the sectors have also made it possible for developers to pay higher prices for land and still achieve acceptable returns on new developments.
Since lots are guaranteed to be built and located within the respective community while priced wholesale, the greatest value is in the price itself.
For example, if the MLS (Multiple Listing Service) listings for quarter acre interior lots within a given community range between $15,000 and $17,000 and they are provided to you wholesale than it is a very fair deal regardless of the exact location and physical attributes of the specific lot.
Land tends to increase in value far more often than not, so as long as you know you are in a good community and have paid below market prices, you can be confident that you've made a sound decision in your investment.
Try to avoid investing in lots near water unless you dream about owning lakeside land. The proposition is not very financially sound, however.
To wit: If today an interior lot is priced at $5,000 and a lake lot within that same community is priced at $30,000, which is more likely to double in value within a few years? It is quite logical that many more people will spend $10,000 for a build-able lot than would be willing to spend $60,000.
Many more people would be able to afford a $10,000 interior lot than a $60,000 lot of equal size that is on a lake.
Property taxes for these industrial-zoned vacant lots are relatively low, many of which are less than $100 per year. Furthermore, since these pre-platted lots are located within planned communities and subdivisions, there are nominal association or assessment fees required.
They are different for each community, but in general tend to range anywhere from $12 to $35 per month.
The association or assessment fees are worth it because a planned community or subdivision will tend to have much greater growth than a random lot outside of a planned community. Building activity is typically associated with appreciation, since it directly impacts supply and demand.
In summary, the risks of buying industrial-zone land do not stand up against the reward.
Investing in land for sale is a great place to put your money. Unlike other investment vehicles like the stock market, land does not experience much volatility. Historically speaking, its value tends to go in one direction and that is upward.
If you choose areas with values that are not over-inflated, then chances are very good that you will be making money and not losing it. On the other hand, if you invest in land in the right place at the right time, your returns can be excellent.
Whether you have $5,000 or $50,000 in capital, a good lot investment is available that will meet you budget. Since pre-platted lots are located in developed or developing planned communities or subdivisions, more people are likely to build there. With every new house that is built, supply gets lower and values should increase.
If you have the capital and the gumption, why not stake your name on a piece of land?
Thank you to Javier Morales for this land investment article
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