The Pros and Cons of Investing in Land

The Pros and Cons of Investing in Land
Written by:
Tsveta van Son
6th December 2018
Updated: 21st May 2019

There are many ways to make money, and passive income is an attractive idea to those not wanting to be slaves to the regular nine-to-five jobs. Think about it: Who wouldn’t want to sit back and let their money work for them? One way to do this is by investing in land. But how safe is it? Here we look at some of the pros and cons.

PROS

With cities filled to bursting, investing in land and building has drawn the attention of many. Not only could you be setting-up your future home in your dream location, but savvy resells can end up earning you quite a financial gain.

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In order for this endeavour to be fruitful, careful planning and research must be conducted before any money is paid out.

Look into where is the best location to buy. This is generally an area that is expected to be in market demand in the near future. Monitor the market and determine when you can obtain it for the lowest possible price. Talk to experts and those in the industry to find out what legal loops you will need to jump through, including obtaining planning permission. This is a very important step in the process, and can dramatically increase the property’s value should you wish to resell – or build for yourself.

Developing the property of reselling it at a later date is another major benefit of investing in land. Once an area is deemed to be attractive to the market, you may find yourself with competing and enticing offers from potential buyers.

CONS

However, as with any endeavour, there are downsides to investing in land.

You are unlikely to break even or make a profit if you end up choosing the wrong piece of land to purchase. If people are not in the market for property in the area, or perhaps the land costs too much in maintenance, it can turn out to be a costly mistake. This can also occur if planning permission is denied.

It is therefore always best to cross all of your t’s and dot all of your i’s before taking that first big step.

One of the biggest risks that comes with attempting to flip your purchased land is that those on the market will not be interested. This can be a big loss if you have developed and built on the land, or a smaller loss if you are simply selling the land with planning permission.

You also have to take into account that investing in land is not going to pay any dividents in the short term from your capital, which you could acheive with other, safer investments.

As with any financial endeavour, investing in land holds a mix of pros and cons – or risks and rewards.

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