BUY Land, They've Stopped Making It!"

Land Investment

LAND has, just like most other precious commodities, an eternal value. It's a good investment option. Just like Gold, Platinum and Diamonds.

Investing in plots, lands, houses or buildings however is a absolutely necessary for people who want to live or work there.1031 Exchanges, Developments, or just Investment can make you 100% return on your money. But you must not forget that the value of the investment is in the expected return, and the risks involved, and not in its physical features. Return from real estate investments is obtained from rental/lease/possible capital appreciation. It can be enhanced by the benefits of taking a loan against the real estate asset.

Key Factors in Land Investment

1). The first and most important rule is to act according to your strengths. Take into account all the aspects relating to your income and budget. You should also to decide on where to and in whose name to invest.

2). The property can be jointly purchased in the name of two or more family members.

3). For joint purchase, investment by the co-owners should be in proportion with their owner ship in the property. For instance, if the property is proposed to be purchased in the name of husband and wife the ratio of 50 : 50, then the investment should also be in the ratio of 50 : 50.

4). Avoid making investment in properties in the name of minor children.

5). In the initial stages your land investment, you look for prime areas where there is less demand and where the premiums are low.

6). For purchasing the landed property, the location should be easily accessible for all basic facilities including hospital and transportation facilities.

7). One should keep in mind about the potential of the area and the property for future yields.

8). Do not invest in already mushrooming localities or in areas where the price of real estate in pretty high. Invest only in the areas that are developing.

9). Decide on your budget and evaluate your current liabilities and savings.

10). Buying plots, vast lands for commercial purposes would do much better profits as the value increases day by day.

11). Investing in Real Estate Investments Trusts (REITS), popular in USA would also bring good profits.

Risks Factors in Land Investments

The real estate market could be a risky proposition for investors not intending to hold the property for long. If you are intend to purchase the landed property, do not rush into calling sellers, real estate brokers or consultants without making upfront preparation. If you hire the services of a real estate brokers make clear your specifications and expatiations. Tell him about your budget too.

The following are risks factors in land investments.

i) Lack of Liquidity: Direct investments requires large commitments of funds and that makes diversification of an investors portfolio difficult. Investments in land or real estate is also difficult to convert to cost quickly. Ownership history, possession and occupation of the property etc., can lead to complexity in transactions.

ii) Maintenance burden: Property maintenance involves significant amount, time, effort and costs. Further, add to this the risk of unauthorised entries/trespassers and change in Governmental regulations. This includes controls over ownership land use and other planning controls and landlold and tenancy litigations.

iii) Government Charges: Government uses the real estate as a taxation over the transactions between the parties. The vendor has to bear stamp duties and registration charges, land taxes and general levies at various level of authorities. Transaction costs in land investments are higher than most other investment avenues.

iv) High risk: Real estate can be regarded as a dangerous investment in the medium and short run, but is often considered safe in the long run.

v). Monopolistic market: Real Estate is one of the most information inefficient market. Information necessary to make informed decisions is difficult to obtain, often imprecise, and some times misleading or contradictory.

vi). Segmentation: Prices often more depending on what kind of property you have: it depends on whether it is commercial, retail or residential/ housing in nature. And this depends on the buyer perception, irrespective of what you might feel.

If one has to consider so many things risk of economic growth, risk of patience, risk of liquidity, risk of geographical concentration - would it not be better to invest in Real Estate Investment Trusts. That can trade in these risks and makes money out of them.

Real estate investment is also a leading indicator of economic growth in all market economies. So keep trade in land investment.