Investing in land is the best way to protect your money, have no doubts about that. The key is knowing how to make a smart investment. Sometimes, the prices for land can shook you, can Real Estate be so cheap? Just remember, when things sound too good to be truth they probably are.
Beware of investment lots
I’m sure you’re aware that there are differences between the properties you build, especially when it comes to land. Certain types of land are ready to build, they’re near the cities or in inhabited areas, and this means they’re good to resell or build, but their price is reasonable.
There are others that have ridiculously cheap prices, but that are nowhere near the stage of construction just yet, and won’t be for the next decade.
These are called investment lots.
An investment lot is an extension of land that you acquire with the intention of waiting several years to see its value grow. The investment land is far from the urban area and is characterized by having very attractive prices per square meter. But what do they not tell you about investment lots?
1.- The average time you need to wait to see added value is very large.
The investment is less than what you might need to buy other type of properties, such as a residential lot, an apartment, a house or commercial premises, but the time that you must let your investment stand to see profits is significantly longer.
You must wait for:
- The urbanization to approach.
- The value of the land to increase exponentially.
- Some developer company that is interested in starting a project and wants to buy your land.
- Enough time for the resale profit to be worth it.
The growth in value offered by investment land can take up to twenty or even fifty years.
2.- The growth you expect may not come
The sales strategy that many use is to promise that the city is «expanding» and is heading exactly towards where the investment land is.
Be careful. No one can predict the movement of the real estate market, and while there are very safe assets such as residential property (houses, residential lots) or rent (apartments), in the case of investment lots things are a little more uncertain.
You will see growth, but it may be much less than you would like. Do you want to know what other options do you have? Read this article.
3.- There are many extra expenses when buying it
Some of these can be:
- Periodic maintenance is necessary.
- Construction of access roads and their maintenance.
- Construction of fences or boundary fences and maintenance.
- Installation of services in case you want to build.
Some extra costs are not included in the purchase-sale contract, but you must take them into account before making a decision. How do these costs affect the return on your investment?
4.- It is a valuable part of a legacy, but it is unlikely that you will be able to inhabit it soon.
If what you are looking for is to build a heritage to live in, perhaps you should look the other way. An investment land is not made to inhabit in the short or even the medium term.
Investment lands are useful as savings tools or if you are looking for the ideal time to resell, they are not spaces made to build immediately because:
- They are far from the urban slick
- Many are not ready to build, that is, they do not yet have permits or certifications
- Nor do they have access to services such as electricity and water
- Or access roads like streets or highways
In order for all these items to arrive you have to shell out considerable sums of money, or wait long enough for urbanization to begin. If you are looking for a place to live in, this is not the option for you.
5.- It’s a good investment as inheritance for children and grandchildren.
Investment lots are a great savings tools, as well as an opportunity to build solid wealth to inherit to your children or grandchildren, especially because of the time it takes before you can see significant capital gain.
If you have limited capital but are worried about acquiring several properties for the well-being of your family, investment lots are an excellent option. Of course, if your capital allows it, explore more interesting options and with more substantial returns such as residential lots.
Investment lots are attractive given their low prices and the promise of huge profits, but it’s worth taking a hard look at the business opportunities they offer, the needs they cover, and, of course, whether it’s worth the long-term investment. If you have doubts about which property is best for you to buy, do not hesitate to contact us, we are ready to advise you.