Is investing in land a good idea?
Investing in land is one of the safest and low maintenance ways of wealth creation over the long term. All land is not created equally, however, and each individual parcel presents different opportunities than the other; while some land has absolutely no potential for value creation whatsoever.
How can I make money by investing in land?
There are many ways to make money through land investment, all of which require varying degrees of effort, capital, and expertise. Further to those personal limitations, there are also land-use controls in place for all land within any given municipality which will dictate what “uses” are permitted on the land. These uses will dictate which method of value creation can be pursued.
Probably the most common, for example, would be homeownership. The average single-family dwelling property typically holds much of its value in the land rather than the improvements (buildings). Over time land will appreciate, which is unlike the structures atop if they are not maintained properly (depreciation). This allows homeowners to capitalize on the increase in value since the time they purchased the property, particularly if they maintain the house well.
Get Property Information | Land For Sale Victoria
Is land a bad investment? | Land For Sale Victoria
Any investment can be a bad investment. Small private investors and large corporations alike can severely hinder their financial freedom if proper due diligence and professional advice is not sought.
Land requires a significant amount of money compared to other investments but over the long term it is a safe method of value creation.
Location and timing are key in recognizing one’s ability to benefit from sheer property value increases over time. So, on average property value increases over long periods of time. However, the degree to which it increases is dependant on the activity conducted on the land. Also, the underlying market dynamics at the time of sale. Commercial real estate professionals are the best suited to identify potentially valuable sites due to their intimate knowledge of zoning and planning documents such as a municipalities Official Community Plan (OCP) or Development Permit Areas (DPAs) and underlying market dynamics.
They can also identify different potential strategies based on an asset to asset basis. For example, buying a brand-new apartment building from the developer and buying a 60-year-old distressed asset and renovating it will both serve separate means of income generation and take varying degrees of risk and expertise. Value on each property will increase differently based on the activity conducted and will require different upkeep strategies.
Does land ever lose value?
Land value, like any product, is dictated by the fundamentals of economics so its value is in constant flux in terms of “market value”. One should never just buy a property with the expectation it will be worth more down the line – there must always be an exit strategy in mind. But land is also a limited resource and like any limited resource, its value increases as we decrease its supply.
Whole markets can have their value wiped out in recessions which is why well-positioned land will always outperform others. Commercial or mixed-use land typically lends more flexibility in terms of which potential methods cashflow are achievable and are typically located in more urban areas which make them more desirable as they are scarcer when compared to something like a residential lot for example.
Is land a better investment than stocks?
It’s all about personal preference, resources, and appetite for risk. Both strategies serve different money-making methods and strategies over the long-term. For example, buying an investment property is about building a portfolio over time. The plan is that with time it wil both increase in value and generate passive income on a monthly basis. Stock can only provide the former and are significantly more volatile over the short term. Owning property can be a massive undertaking if undergone by oneself. However, stocks require a significant amount of attention on a daily basis. This is true if you hold large positions in which the stocks’ value varies significantly.
More money can be made in shorter periods of time by investing in stocks as stocks are much more liquid than real property. A casual stock investor can get lucky with a large position and be able to cash out within weeks or even days. That’s why the two should never really be compared in a “one or the other” scenario. Unlike investing in stocks, you cannot just jump into the real estate market with the land. No matter the scenario, you will need a significant amount of capital, to begin with.
You will require a mortgage (broker), a realtor, and a lawyer at the bare minimum. If you plan on building on the land and holding it as an investment property, then even more capital and expertise will be required. This will be along with further and more intensified work with realtors and lawyers. The typical timeframe for such investments can be 5-10 years at the minimum. Further, in the case of single-family dwellings, 20-30 years. However, as you build your portfolio over time the sale of assets can result in huge lump sums of cash to be reinvested.
Is now a good time to invest in land?
Now is as good of a time as ever, as it is entirely personal. For example, there are many investors who have withdrawn their holdings traditionally held in stocks and are now seeking investment properties such as apartment buildings or office buildings. If you are prepared to make an investment in real estate property, the first step should be the consultation of a realtor. An investment of this magnitude should not be taken lightly, therefore it is not advisable to view the investment as attractive simply due to the fact there is currently a global pandemic. An investor must be diligent and have thoroughly road mapped a strategy for success.
We hope you enjoyed our Q&A about Land For Sale in Victoria. If you want to learn about ClearWay, see some of our videos.
FAQs | Land For Sale Victoria
Will property prices rise??
We have a very telling story to answer this. It would be to look up Greater Toronto housing prices over the past hundred years.
Is now a good time to invest in land?
This depends entirely on location, expertise, and financial capability. Victoria BC, for example, is well isolated from many of the adverse effects of the Covid-19 pandemic. Therefore, values have remained somewhat constant. Underlying dynamics within the market pertaining to residential and industrial vacancy have remained nearly unchanged over the course of the pandemic making them the clear emerging asset classes for investment in this current market. Attractive financing options are at your disposal however available which has pushed some “on the fence” investors to make the leap into their first investment property. Rigorous due diligence and consultation of professionals are now more important than ever to gain confidence in the potential of an investment property and be successful in value creation.
Do I need a Realtor?
The services of most Realtors are free for buyers.
Do I need to learn the law to represent myself?
Absolutely. It’s better to hire a real estate lawyer.
How does the ClearWay Law system work for people that fill out information?
We will have a Realtor contact you depending on your needs.
How much does your services cost?
Our Realtor connection service is free for the public.