The option of buying vacant land is frequently overlooked by property investors. While many Australians purchase vacant land on which to build a home of their own, buying and selling vacant land as an investor has long been overlooked in favour of buying, selling or renting property. However, there are a number of benefits to buying vacant land as an investment, especially in the current real estate climate.
It’s Significantly Cheaper
Undeveloped, vacant land will always be significantly cheaper than land that has been built on. Even if the building on the property is of no value and will need to be demolished to make way for the construction of a new building, which could be a house or a block of flats, this is an expense that the buyer will need to take care of.
It Offers Greater Flexibility
This is one of the most notable benefits to buying vacant land as an investor. It’s also a prominent reason why so many Australians purchase vacant blocks of land on which to build homes of their own.
A vacant block of land is similar to a blank canvas in that it offers maximum flexibility regarding the placement of the house and the size of the front and back yards. This degree of flexibility can make land very appealing to potential buyers at a later date.
It Offers Long Term Appreciation
A vacant block of land offers excellent long term appreciation, often significant appreciation, especially in areas that aren’t appealing to homebuyers at present, but will be when future developments take place.
This may be an infrastructure development, like a major road or a train line, or it could be a private commercial development. Like an industrial park that brings jobs and growth, making land in that locale more valuable as demand for houses rises. Generally speaking, land stores long term value better than developed properties which have a tendency to lose value if they don’t receive periodic improvements.
It’s Hands-Off and Low Maintenance
Vacant blocks of land are very low maintenance and they’re often described as a ‘hands-off investment’. With a few exceptions, like mowing the lawn to prevent it becoming an eyesore, there’s really very little for investors to worry about. What’s more, rates, insurance and property taxes will also be lower and investors needn’t worry about paying someone to manage it on their behalf.
The Drawbacks
Investing in land isn’t without its drawbacks, however, as there are certain notable negatives to investing in vacant land, especially if you’re borrowing to purchase it. While vacant land appreciates over time and could net the investor a healthy profit, it won’t earn them an income until a buyer is found for it and that buyer pays them more than they paid – there are risks involved and investors must be aware of this.
Buying land represents a great opportunity for investors, but they need to do their research, be aware of the risks and have the capital to purchase the land outright.