Similar to playing the stock market, private equity firms and individuals are looking to purchase cheap land in markets where real estate has struggled.
Local developers, once upon a time, were the only ones who purchased land from over-leveraged homebuilders when the real estate market hit a funk. Now everyone is getting in on the play. Their goal is to buy these hard assets and wait until the markets return to respectability.
The rewards of buying industrial-zoned land overshadow the risks involved. Again, using the stock market as an example, purchasing land is more logical because land does not experience as much volatility. The value of land tends to go upward.
The play on buying land should increase. Brokers have indicated that investors are waiting for prices to fall even more. They envision the day in which prices bottom out, low interest rates help revive the market and builders return to increase bids on land prices.
A prominent question for investors: Why not invest in an existing building instead 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.
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 smart 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 couple 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 percent 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.
In summary, the risks of buying industrial-zoned land do not stand up against the rewards.
Investing in land for sale is a logical place to put your money. Unlike other investment possibilities like the stock market, land does not experience much volatility.
Remember to look at pre-platted lots located in developed or developing planned communities or subdivisions. More developers are likely to build in those locations. With every new house that is built, supply gets lower and values should increase.
Donald Trump, for example, made his millions by what is called land banking – the process of buying and holding land for future sale or development.
As with any business plan, you must be prepared for all facets of land purchasing. It requires not only $5,000 to $15,000 of capital to get started, but also an impeccable preparation scheme for the challenge.
Market research, attending city zoning meetings, and on-going communication with prospective sellers is a necessity. Purchasing land is much more than blindly paying money for something that might not possess value. Making the right decisions will determine if your venture will be profitable or a financial mistake.
If you have capital and the gumption, staking your name to a plot of land might be the best move you will ever make.
Thank you to Javier Morales for this "Buy Land - Should you invest in land?" article
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