Buying LAND…Advantages & Disadvantages
Ever thought about buying land as an investment? A favorite saying in the real estate industry is, “Location, Location, Location,” known as the 3 L’s of real estate. The location of real estate will dictate it’s value more than any one factor.
I’ve mentioned on more than one occasion, that God isn’t making any more land here on earth. There is a finite supply of land that we can build on, and the population is growing exponentially. This is a very good thing for the land investor but is it the right investment for a novice investor? Here is a list of advantages and disadvantages to consider when buying land:
1) Supply & demand will always put upward price pressure on land.
2) The cost of land is relatively more affordable when there are no improvements, (structures built on the property), on the land.
3) Due to the relatively lower cost of land, expenditures like Property taxes, and all around maintenance are less.
4) Unlike Rental property, you’ll never have to worry about finding tenants, have to evict anyone, or worry about city regulations that could restrict your income.
5) Choices. You can buy land in varying sizes, from several thousand square feet to acres. You may not have enough money to buy or build your dream home today, but you may be able to afford and secure the land you’d like it to be built on in the future.
1) You will not have immediate cash flow from the purchase of land. Profiting from land could take years. If you need investment income now, rental property would be a better investment choice.
2) Geological surveys can be expensive and are recommended to ensure your land is free from any condition(s) that would make it unsuitable for development. Conditions like earth fissures, chemical contamination, flood zone status, to name a few, can have an adverse effect on the value of your land and your ability to sell it.
3) Zoning. City government can step in at any time and re-zone the land for a different use. If you bought land for future residential prospects, you may find that your land in now zoned for commercial use. This may or may not adversely affect your land’s value.