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What are peoples takes on land investment? Where does land fall into an investment portfolio? Is it acceptable to go into debt to purchase land as an investment? What are the risks associated with it, aside from needing insurance? Buy Low, sell hi, right? Well, it's not going to get much lower, so you know the price won't bottom out on you right now. Other issues?
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Personally, I don't invest in anything that doesn't provide some measure of ongoing return. I don't buy land. I don't buy gold or jewels. I don't buy art or collectibles other than for my own enjoyment.
It is easy to say that land prices won't get much lower but who know if that is true. And who knows how long it could take to see a significant profit on your investment.Steve
* Despite the high cost of living, it remains very popular.
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The only guarantee with land is property tax....Comment
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While I don't hold land myself as an investment, land is an OK, but not necessarily the best, investment that makes many people rich, probably more likely over the long haul than the short haul, but then that's true of most investments.Originally posted by swanson719 View Post
Borrowing to buy land as an investment is about the same as buying stocks on margin (borrowing money to invest it). The risk is that your investment will return a rate lower than the rate you're paying to borrow the money. Or, worse, if your investment declines in value while you're still having to pay interest on the borrowed money.
Some cons: 1) Some costs associated with land ownership: Initial purchase price; Interest (if borrowing); property taxes; insurance; Home Owners' Association fees. 2) Vacant land is usually not very liquid since it can be difficult to sell, especially at the price you want.
Some pro's: 1) I believe most people get a tax deduction on the interest paid on the borrowed money. 2) At least you can go visit your land! You can't really go visit your stocks
One of the reasons I think people that borrow to buy land can become wealthy over the long haul is that it's sort of a form of "forced investing"; When you lay out an investment strategy for yourself that involves only stocks/ bonds/ mutual funds, that requires real discipline to continue making your monthly or bi-monthly investments, & has no real penalty if you get off your plan. With mortgaged land, if you fail to pay your payments (i.e. continue making your investments), they'll take your land from you - A severe, expensive penalty!
All that said, I've read that, over any 10-year period, stocks have out-performed all other investments ... including real estate.Comment
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While all of this may be true, what is the difference between getting into say, bonds and CD ladders, as opposed to land? I'm talking about as a safety thing. I obviously understand there is a gross difference in semi-liquid investments being stocks, bonds, cd's, etc. vs the sometime hard to sell land.Comment
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"Land" is too generic. It is like asking if you should invest in "a company."
Some land is a good investment, other land is not. Some is good long-term investment but not short-term, or vice-versa.
Basic questions, to start with, include:
Is it buildable?
What is the zoning? What, if any, are the restrictions?
What are the utility easements?
What is the market like in your area?
If for development, what are the environmental regs?
How long are you planning to hold the land? Are you speculating?
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As long as the land you buy is only a portion of your entire investment portfolio, i.e. diversification, you'll probably be fine. But, you should also be able to answer poundwise's questions; If you're talking about borrowing money to buy un-buildable swamp land in rural Louisiana, probably not good! If you're talking about buying a few acres near a stable city, that can be built on, subdivided, isn't too restrictive, etc., & can hold it for 10 years or more if needed, that's a lot better anyway.Originally posted by swanson719 View Post
I assume by "safety", you mean how safe the investment is? Or do you mean diversification? Lots of people invest in land. I'm not one, but I think it's OK. I just wouldn't want to be someone who invests only in land. That would be too wild a ride for me.Comment
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Just apply those same questions you stated in a stock sense and you will understand that there is really no short or easy answer.Comment
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If you're buying land to use in the future to build a retirement house, it's a good hedge against inflation to buy now. It's not a liquid investment, though, and has the carrying costs of taxes, maintenance, and perhaps insurance.
There are all kinds of risks that could affect the value besides just the real estate market. Development in the area, zoning, utilities (does it need a well and septic), easements, flooding- there can be many factors depending on where it is.Comment
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Land could be valuable or it could be essentially worthless. It depends on a number of cicumstances. Can it be logged, mined, leased for some purpose, or developed? The only sure thing would be property taxes. Unless you have some inside knowledge, such as a huge natural gas deposit being directly beneath it or a cell phone provider looking at it as the perfect spot to put up a new cell tower, then I would steer clear.BrianComment
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They aren't making any more of it. We have 5 acres in another state. Paid cash, and the taxes are low. It's not so much of an investment as it is our own personal camp ground. Might build a little cabin there one day. The neighbor to the south writes me at least once a year wanting to buy it. We could easily double our money on it from him, but we don't really want to get rid of it.Comment
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If I had my own say, I would sell my house and buy an duplex or 4 plex and fix it up. I would live in one rental then rent it or sell and move on to another bigger project.
I would start this with minimal debt and continue until I could payoff the house I want in cash. To me, it would be an adventure.Comment
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