Returns on Land Investment

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Investing in land is one of a number of ways of potentially using money to make more money, though compared to the relatively safer savings plans offered by financial institutions it could be considered to be a high-risk way to invest. However, most investments have some sort of risk – always remember the small print that states that the value of your investment may go down as well as up – and land investment is worth exploring as it can prove a lucrative way of building up a strong financial portfolio.

Land is still plentiful, though as it is finite land prices are more likely to rise rather than fall. This does fluctuate with the state of the economy, but there are professional land speculators who are prepared to buy a piece of land and can afford to wait until conditions are right before either selling it on or developing it themselves.

How land can be used

Land can be bought for a variety of purposes: a simple plot that the original buyer can build their dream home on; a large area that may provide a housing development; a strip near a developing town or settlement that has the potential for a mall with retail and food offers.

The key to success is to ensure that the research into the area where the land is to be bought is completed extremely thoroughly. Land investors will take time to examine the profile of an area, carefully investigating and accurately predicting if and when economic growth will make it worth purchasing plots. Economic cycles vary, and a speculator could be sitting on the land without getting any return for some time, perhaps years. Not everyone can afford to do this, but buying and selling at the right time can lead to significant profits, sometimes in double-digits.

Assessing the risks

The flipside to this is whether or not the investor can wait long enough to realize a good profit. If an expected economic boom turns out to take longer than expected to arrive, or does not turn up at all, the land may have to be sold on to get at least some profit. So, although returns can be high if all the right circumstances combine, it is a riskier proposition than simply investing money into a savings plan offered by banks or other financial institutions.

Short-term investments in land may pay off if the investor gets in before other developers, the economic boom happens rapidly, and the land can be sold on for a quick profit. Those wanting to do their own developments may find the cost of borrowing money for this relatively high, so need to look carefully at the bottom line before progressing.

In terms of financing opportunities to consider, Florida land investment is popular thanks to its ever-increasing retirement market, and areas in cities that are just starting to be up-and-coming may also provide a good place to begin for a first investment in land. Get-rich-quick schemes should be avoided like the plague. There are, unfortunately, snake-oil salesmen who will try it on. If it looks too good to be true, it probably is.

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Money

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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