But the perception remains that investing in land is very much a rich man's game. In the world of investment properties, land represents a truly unique real estate importance. With its capacity to appreciate in value, land provides unique opportunities for buyers to diversify their portfolio, while reducing many of the risks associated with commercial real estate. Essentially, it is becoming more and more apparent that land should be included in every investment real estate portfolio.
Investing in land is also smart because if it is located in the path of growth, demand for development will reach the area, thus increasing the value of the property. .
But beyond diversification and relatively low prices, land is a smart investment, since it mitigates many of the risks associated with commercial real estate. Owning piece of land does not require building maintenance & tenant vacancies, leaving the owners with no rent payments for a period of time. However the risks associated with land ownership might be that the piece of land may not be developed in due time because of change in environmental regulations or unforeseen zoning & economic changes. However, a thorough review of the property’s due diligence will help you to minimize these risks and provide rich rewards associated with the property.
In England & Wales, in year 2004 a survey undertaken by Halifax showed that the value of residential land had risen by 808% over the previous twenty years. This figure excluded London. During the same period, surprisingly the average house price had risen by only 306% - making investment in land a better prospect than bricks and mortar. Nevertheless, the Halifax Survey also showed that land investment, like stocks and shares, could go up and down in value. There was a correlation between land values and house price inflation. "When there has been either positive or negative price growth in the housing market, those have typically been amplified in the value of developed land” (Halifax Residential Land Prices Research, 2003).
Land is always worth what you have paid for and still has always appreciated in value over time. The value of the land will be determined by what you can do with it. If it is farmland, it will appreciate in value, however, the percentage of appreciation will be smaller. Land that can be developed for residential and or commercial dwelling, it will have a larger potential to increase its value over time. Land requires no upkeep or maintenance. Land experiences its greatest increase in value once it achieves planning department’s permission for development. So it is not always affected by the ups and downs of the property market. Anything you build on the land that could go down in value but the value of land will always be worth what you have invested in it (unless you over-paid for it to begin with).
The appreciation of land valve depends on what stage the development is in. If it is in the beginning stages it could take as long as 5 to 7 years. If the annual appreciation meets your expectations then that is the most important thing. For the land investment in Major Canadian Markets we are promoting, you should expect that the value of your investment to be realized by 2020. The length of time for you to realize the principal and the gain on your investment is estimated between 8 to 12 years. At that point you can exit with your profits.