IS BUYING A VACANT BLOCK OF LAND A GOOD INVESTMENT? – Think & Grow Finance

IS BUYING A VACANT BLOCK OF LAND A GOOD INVESTMENT?

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There are many things to know and consider before investing in land. As exciting as it can be to own a piece, make sure you do your research as investing in raw land (undeveloped without a property on it) can be complicated, has its drawbacks and potential risks! If you do your due diligence, you can rely on making a return over time through capital growth or development. Either way, they aren’t making it anymore!

Let’s have a look at the key pros and cons of purchasing land and how it stacks up as an investment.

Pros

  1. Low deposit required
  2. Low stamp duty as duty is only calculated on the land price and not on the construction
  3. Eligible for first home owners grant
  4. Most lenders will lend up to 95 to 98%
  5. Better tax benefits for depreciation on newer homes
  6. Rental returns may be higher as most tenants prefer newer properties
  7. The land will be purchased and sold “as is”. No repairs or renovations are needed
  8. Effectively can be bought and sold without the need to physically set foot on
  9. New homes are usually more energy-efficient with no need to repair or replace
  10. Modern floorplans and designs can be popular

Cons

  1. Lack of amenities & infrastructure in a newly released land estate
  2. It might take some time for capital growth especially if the land is bought where there is a surplus. Real estate investing relies on a basic principle of demand and supply. If there is more supply than demand than it will be more difficult to get bigger return on your investment
  3. Holding cost – until the property is built upon the land, it will sit vacant and will cost money each year to maintain
  4. Building a home can have construction delays and hidden costs
  5. Established homes give you immediate investment income
  6. The best capital growth traditionally comes from established areas where vacant land is rare and expensive
  7. When buying established, you are aware of surrounding facilities and other homes
  8. Renovating or subdividing will add value to an established home

For an honest and unbiased opinion, talk to Think and Grow Finance today on 03 8390 5855 or email [email protected]