From original author: KC Lau. https://kclau.com/investment/why-invest-in-land/
Most people think that land investment is only for real estate developers, who buy big parcels of land for commercial, or residential development. But actually, investing in land is one of the sound investment strategies available for common investor, both large and small.
Why Invest in Land?
- possibly higher profits
- less risk – imagine your land got hit by a bomb, it is still a land anyway.
- greater flexibility for maximizing value – you can plan your dream project on it.
- easier and simpler investment management
- land is real – it is tangible, can be visited, seen and walked on
- land is a finite resource
- land increases in value due to demand outstripping supply.
Land changes in value simply due to the whim of mankind. When the local authority suddenly approve a new project on an abandoned land, it could becomes worth over 10 times! What other investment could possibly achieve high return at no extra cost to you at no risk?
There is a simple piece of advice I got from my uncle in Johor. He invested heavily in palm oil estate. He hinted me that when human population is getting bigger, and global warming increases the sea level, the remaining land will become less and less on earth over time. Buying a land as a long term investment is definitely worth it. This is a direct logic which is very true.
Land Valuation
Compared to houses and commercial buildings, land is much trickier to value because its values varies greatly by what it can be used for. Historically, there is a formula which is that of the houses selling price, 1/3 was the land cost, 1/3 was the building cost, and another 1/3 was the cost of marketing, overheads and also profits.
Recently, with house prices spiraling upwards, plus the competition amongst developers, the profit margins have been reduced from time to time. You will most likely find the formula had changed. For example:
Buy a land, must remember these:
- always buy freehold unencumbered land (free of mortgages, caveats or charges).
- always get the land registered in your name with the government land registry office
- get 100% ownership of the plot and full legal ownership, with the ability to sell it at any time to whomever you want and at any time or price you desire.
- settle for nothing less, any doubts of fancy clauses just walk away from it.
