Why is Buying Land a Good Investment in 2023?
Have you been eyeing a piece of land, but the thought “Is land a good investment in 2023?” lingering in your mind? To answer this, let’s quote one of the reputed business mogul giants of this era, Warren Buffet, “Bad times are investors’ best friends”. How is this relevant to you buying land
If you are keeping a tab on the market, then you know that bad news is lurking just around the corner. The global market is nervously preparing itself to embrace a possible recession, which some experts predict to be worse than that in 2008.
The COVID-19 pandemic which hit the global economy hard, alongside an aggravation by the Russia-Ukraine war, and to top it off the massive layoffs and declining revenues of industrial giants, are all indicators that we’re in for some hardships. When this happens, buying land for investment in 2023 can be a very lucrative move indeed.
What to look for when buying land?
Buying land can be tricky. To make your investment profitable, it is essential to cover all your bases. So to help you decide on what could be your biggest investment, we’d like to share with you everything you should consider before purchasing land.
Making sure you have the blueprint of future developments and what the local government has in mind for the space can give you the assurance of knowing whether the piece of land you’re looking into buying will increase in value or not.
Pro Tip: For quick and high returns, look for land in areas where housing demands are on a rise. Just know that this would also mean you will have to pay a higher premium.
Another crucial factor while purchasing land is ‘zoning’. It’s recommended to be familiar with the local laws and zoning of the area where you plan to purchase land. Some areas are for commercial use, some for residential, while others are both. Whatever you intend to do with the land, look into zoning beforehand to avoid disappointments later.
Before purchasing vacant land, look out for any red flags.
For example, if the sale price offered to you is way less than other properties nearby, that should set the alarm bells off! Find out why from local resources. Maybe it is a flood-prone area or sees many wildfires. Whatever the reason, you must investigate.
The basics like having a well-planned sewage system, electric grids, and security cannot be compromised. So make sure you check for public utilities before purchasing raw land.
Easements are a third party’s right to use your land. Easements do not directly affect your investments but are important.
Future Appreciation In Value
Life is unpredictable. You may not end up living or constructing your dream house on the purchased land. To make the best out of your investment, ensure you invest in a land whose value appreciates in the near future. This brings us to the next topic.
What causes the land to appreciate in value?
Several factors lead to land appreciation which are:
Increase In Demand
Increase in demand leads to a rise in land value because more people are interested in buying land meaning that they have higher prices to offer.
Economic Advancements In The Area
Economic advancements in the area can also lead to increased demand for land, which in turn increases its value. When the economy is doing well and people have more money to spend, they are more likely to buy homes or businesses which require more space. The increase in demand then leads to an increase in land prices.
Changes In Policy
Changes in policy can also lead to an increase in land prices.
If the government passes laws that require new developments to be built on previously undeveloped land, this will increase demand for such land and therefore increase its price.
Another factor that can affect land prices is time. The older a piece of property is, the more valuable it tends to be. This is because older properties have had more time to accrue value and interest from potential buyers.
Can also cause land prices to increase. As the population of a city or region grows, demand for housing increases. This leads to an increase in the value of land, which can be sold or rented out at higher prices as a result.
Can also affect land prices. A new road or housing development, for example, may increase demand for land nearby and therefore drive up its price.
Overall improvements in the area
Such as an increase in shopping facilities or a new train station can also boost land prices.
What causes the land to depreciate in value?
If your land property can rise, it can fall as well. While demand and supply do affect the value of land, other factors that impact its value include:
The presence of environmental hazards such as floodplains, sinkholes or erosion can make land unusable and thus decrease its value.
Changes in zoning laws or policies can make land unusable. For example, a change in zoning laws could prohibit the construction of homes on a parcel of land.
Changes In Market/Market Crashes
If the market is flooded with land, it can drive down the price. Similarly, a sharp drop in demand for land properties can also lead to a decline in value.
If the land has been used for hazardous activities (such as toxic waste dumps or chemical spills), it may not be suitable for other uses. This can decrease its value.
What Are The Benefits Of Buying Land?
The land is a good investment and reaps endless benefits when purchased smartly. Here are all the advantages of purchasing vacant land:
- Buying land is cheaper than purchasing a fully structured property.
- The buyer gets a plain canvas and can do anything they like with the land.
- Maintaining vacant land is way cheaper in comparison to a structural property. There are minimal maintenance costs and property taxes and zero mortgage, utilities, and insurance costs.
- It is one of the safest investments you can count on long term.
What Are The Disadvantages Of Buying Land?
There’s a risk involved in deciding what to do with vacant land. Here are some more disadvantages of buying land.
- One cannot expect to start earning right away. The return from a vacant land comes much later.
- Building a property on land can be expensive.
- It is hard to evaluate land’s value.
- Zoning and policy changes can impact the value of land.
Ways Buying Land Can Make You Rich Expeditiously
So is investing in land a good idea? As a financial decision you can expect it to be a solid one. Here are a few ways it can make you money:
- You can use the land as a mortgage for loans to start your business.
- You can lease out the land and use that money to invest in other lands. This way you can work your way up to owning multiple properties.
- You can sell the land for higher profits when the time is right and use that to further invest in other properties.
- You can use the mortgage on the land and use that loan to build a house that you can rent out for a stable income. You can then use this income to accumulate more assets and investments.
Buying land is a great long-term investment. It is lucrative, provides peace of mind with a sense of ownership, banks always welcome your loan requests and its’ low-risk. If you seek a quick return, buying vacant land is not an ideal investment for you. However, if you are looking for long-term gains, there is nothing better than buying land.
We hope this blog will help you make a more informed and sound decision. No matter what you invest in, it is always good to weigh the pros and cons. Doing so can prepare one for all future adversities and even prevent losses in the future.
Remember that with any of your investing needs, we at Hard Money Lenders are here to help. New to investing? Check out our article Real Estate Investing 101
Frequently Asked Questions
- Is owning land profitable?
Yes, there are several advantages to owning land. In addition, this type of investment can turn out to be profitable if you make decisions strategically.
- Does land appreciate in value?
Land appreciation is 100% possible. Considering all essential factors while buying land, you can see an appreciation in its value.
- Is it better to invest in land or a house?
Investing in land and investing in a house has its benefits. It completely depends on the type of return you are seeking. If you seek fast returns, it is better to invest in a house. On the other hand, investing in land can be lucrative if you seek a low-risk, long-term investment.
- How do you make money buying land?
There are countless ways of making money by buying land. You can resell the land, build a commercial or residential property, rent it out, or grow crops. It completely depends on your strategy and the locational and zoning factors.
Adam Smith has spent the last 5 years in the Private Money Lending world helping real estate investors secure financing for their non-owner occupied real estate investments. When he’s not thinking about real estate, Adam is an avid Jazz music fan and fisherman.