Land Investment - A Surefire Winner?

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Many parts of the world are experiencing severe land shortages. Some of these countries are seeing an explosion in population and are struggling to find places to “store” them. Logically, this means that over the longer term land prices will rise.

Consider these benefits on land as an investment:

· Countries like the United Kingdom have seen land prices explode over the past two decades. In the U.K., land investment has given a better average return than both stocks and real estate with a 900% return on capital in that period.
 

· The United Kingdom is experiencing a severe land and housing shortage which means that any land than can be developed fetches a huge premium. The government has plans to develop a huge amount of land into affordable housing and other projects which will drive up the price of land – we’re already seeing this in action.
 

· Unlike real-estate, land investment is not a hands-on investment. Real estate investment can be highly rewarding of course, but there can be several time consuming administrative responsibilities such as ensuring that the property is populated with tenants, finding competitive mortgages, keeping abreast with legal commitments, checking the property and much more. Land investment by contrast is far less involved and a rather more lazy investment.
 

· It’s possible to invest in land with far less money than is required for real estate development. It’s possible to buy plots of land (sometimes as part of a larger consortium) from as little as £5,000.
 

· Usually, there are no “ongoing” costs associated with land purchase. With real estate, it’s obviously important to set funds aside for such possibilities as repairs & maintenance and baron months (where there may be no tenants but the costs associated with the property such as mortgage etc must still be serviced). With land investment, the only costs are the purchase of land and the administration involved with doing this.

While land investment has some clear benefits with remarkable growth potential there are many factors that must be considered before placing your capital into land. Here are some of the limitations and dangers:

· It’s important to be wary of some companies that sell land that in actual fact has little or no chance of being developed in the near future. Some companies make their money solely by selling plots of land to unwitting investors – make sure you do your own thorough research before investing your cash.
 

· In the UK, purchasing land speculatively in “green belt” areas can be a dangerous thing. There can be a lot of public demonstration for green belt land that is put forward for development – and if your plot fails to achieve planning permission it could mean that your land is temporarily worthless (until further developments occur).
 

While your money is tied up in land it cannot achieve active returns or any yields. Ordinarily, you would purchase a plot, get your legal title document and then wait for the plot to be bid on by a developer. As such, land investment is not an income producing asset – with real estate your investment churns out regular rental yields (if your calculations are correct then you’ll be making positive income each month on each property you own) as well as capital appreciation on the property. With stocks and bonds you can expect dividends. With land investment, your only income is on sale of the land – where you hope for some very significant capital gains.