For hundreds of years land investment has been used as a vehicle for making money but was often reserved for the rich. However, nowadays, with the emergence of new cheaper land markets and the ability to invest in small plots of land the market has been opened up to a whole new category of investors.
It is essential with land investment that people don’t get carried away with simply buying cheap land. Obviously a low-cost piece of land can seem appealing, however it is important to remember that your profit will only be made when selling the land and therefore there has to be some reason for the land to increase in value. A cheap land investment is great but if it has no reason to increase in price then how do you expect to make any profit?
So, with land investment there are a few important factors to consider when looking at a plot of land, no matter how large or small. The first to consider is obviously price. Is the land you are investing in worth the price today that is being asked? Secondly is how long you intend on holding your investment. You then need to compare that time with a realistic projection of what your land will be worth when you intend on exiting the investment. For example, if you only want to hold your land for 3 years but projections show that land values in that area are not likely to rise much for the next 5 years then you are investing in the wrong land investment!
More importantly you need to consider what makes your land investment so potentially profitable. Are you simply buying a cheap piece of land and hoping it will increase in value or have you done your homework? If you are investing in an area that has reason to increase in value fast then this is the true investment that brings big returns. So, look for factors that could contribute to this. For example, is your land inaccessible at the moment but that is likely to change over the next few years by the introduction of a new road, railway access or airline route? Maybe it’s cheap at the moment because the area is rather unpopulated or unappealing to tourists but the area is beginning to gain a growing amount of tourism each year and is looking to become a hot spot in the future?
Land investment can be very simple but the most simple thing is to forget the price you are paying and concentrate on what the cost you will sell at and how realistic it will be to achieve the returns you are looking for from your land investment. If you can’t see a reason why the land value would increase then you’re probably investing in something that will not give you the return you were hoping for.
If your land investment carries reasons for growth in the future then make sure you are paying the best price you can and take into account how other costs could affect your return. For example, a great priced piece of land is no longer a great priced piece of land if you have to add 60% to the price to cover legal costs, transfer fees and other associated land investment charges.
Land investment can be one of the easiest and most financially rewarding types of investment there is. The secret is to keep a cool head and select the right area by not looking at what makes the land good right now, but what makes the land look much better in the future!