For new investors, the debate between buying land or a house can be quite complex.
However, what most people fail to realize is that investing in vacant land can be much more profitable than the alternative. However, it remains a widely overlooked investment opportunity.
Whether you’re buying land to build a house or as an investment, here are a few things you need to know before you make any big decisions.
The land is easier to maintain
Plots, without a doubt, are much easier to maintain than houses or even flats. Of course, it doesn’t mean you can buy a piece of land and then completely forget about it. But compared to other types of residential and commercial properties, owning a plot is relatively hassle-free.
For starters, there are a lot of things to look after when it comes to apartments and houses. For starters, both of them require a lot of upkeep. If you are planning to rent out your property for a quick return on your investment, bear in mind you would have to deal with everything ranging from minor plumbing and wiring issues to major renovation and remodelling projects.
Then there is the issue of dealing with tenants, some of whom can be really tough to negotiate with. While most people take care of their rentals like it’s their own place, some might not be as courteous. As a landlord, if you decide to rent out your property, you’ll be responsible to fix the peeling paint, discoloured wallpaper, scratched floors, worn out carpets, water damage and other inevitable issues that are bound to arise with time.
Take a look at some of the things tenants check out during a house inspection.
Meanwhile, if you’re buying land for investment purposes, then you don’t even have to visit it often. There are no utility bills to pay and property taxes on plots are also relatively low. Moreover, if your plot is in a secure location, which means there is a boundary wall, you only need to check it out once in a while to make sure there are no illegal encroachments or any other prominent damage – like a burst pipeline. If everything appears fine, you’re pretty much good to go.
The land has higher resale value
If you are confused whether to invest in land or a house, just remember more often than not, it is easier to sell a plot than it is to flip a house. The reason is simple: the resale value of buildings depreciate really quickly whereas the value of land increases with time.
While you may be able to instantly rent out a house or an apartment for a steady flow of cash, your property will continue to lose its value. Its market value will depreciate on account of old construction style, outdated design and general wear and tear. Construction of new, modern projects in the area offering better amenities could also have a negative impact on the price of your residential unit.
Meanwhile, compared to houses and flats, the value of land appreciates rather rapidly. That’s especially true if it is located in a popular area. After all, there is always a large number of affluent buyers who prefer buying land before building a house that fits their needs.
Not to mention, selling an older house could be a bit of a hassle. The reason being most homeowners have to spend money and time fixing major problems and making it look presentable to potential buyers.
This is probably the most important point in the buying land vs house debate.
Although there is no proper cash flow right away, buying land is an excellent choice for those interested in long term investment. Although a plot might just sit there for a while without making any profit, the high resale value will more than make up for it.
You Can Call Your Own Shots
If you are buying land to build a house, you have complete liberty to do as your heart desires. Regardless of its size, it’s up to you whether to buy and hold land as an asset. After all, you can either sell it or construct a building on it. Not to mention, it is generally cheaper to buy land and build a house.
Of course, you’ll have to be careful about not going over your budget, obtaining permits and following the rules and regulations laid out by the concerned authorities.
However, you would still have an opportunity to design your home based on your personal preferences. For instance, if you want to construct a double story house with a front garden, you are free to do so. Similarly, if you have a particular floor plan in mind or want a pool in your backyard, you can incorporate that into your design. Of course, you’ll have to discuss it with your contractor first.
Even if the size of your plot is fairly small, you can build a multi-story building. In fact, you can even rent out a unit or two while living there yourself.
Moreover, as you will be able to call your own shots, you won’t have to think twice about using expensive but durable materials. The same goes for installing solar panels to save up on your electricity bill. Since installing a solar energy system is a big commitment, most homeowners might not agree to make such changes to their property. However, if you own the property, you can consider making this eco-friendly one-time investment without much interference from others.
Plots are relatively easier to sell
Apart from having a significantly higher resale value, plots are also relatively easier to sell. That’s mainly because the inspection process is much simpler and a lot less complicated. A potential plot buyer would only check the location of the plot, availability of certain amenities such as gas and water along with any outstanding payments. They might also verify if there are any ongoing criminal or civil litigation issues they need to worry about.
Meanwhile, if you try to sell a house that was previously occupied either by you or tenants, the buyer would most likely do a thorough inspection of the structure’s foundations, flooring, plumbing, electrical wiring and so on.
Of course, investing in vacant land has its own advantages and disadvantages. You would not be able to instantly earn money through it. But you can actually make a lot more if you just let it sit there for a while.
However, at the end of the day, the winning argument in the buying land vs house debate lies in the reason you are buying the property.
If your intent is to build a house and rent it out, it might save you some money and time if you just go ahead and purchase a house instead of a plot. On the other hand, if you are looking to make an investment, buying a plot might be a much better option.
