Ever since the pandemic, it has become more difficult for people to purchase real estate, primarily due to rising property prices and competition because of a lack of availability. Still, since real estate tends to keep its value, owning property is more important than ever as inflation rears its ugly head.
If you’re a novice real estate investor, you might need help determining whether to purchase a parcel of land or a home. In addition, find the answer to the most important question: “is it better to invest in land or a house?” and make an informed decision.
Land Is Easier to Maintain
Undeveloped land is far simpler to maintain than houses and has little to no additional upkeep costs. Of course, this does not imply that you should purchase a plot and forget about it, but owning a piece of land is less demanding compared to alternative investments.
For instance, if you intend to make some passive income out of your land, do some simple touch-ups to enhance its quality by leveling the uneven ground and removing invasive plants. On the other hand, if you choose to rent out your house, you will need to deal with everything from minor wiring and plumbing problems to extensive remodeling and renovation work. Also, you will be responsible for fixing any issues that inevitably develop over time, such as water damage, peeling paint, scratched flooring, worn-out carpets, and other issues.
Moreover, if you’re using the buy-and-hold land investment strategy, you don’t even need to visit the plot of land regularly. Suppose your plot is safe and has a boundary wall. In that case, you only need to check it occasionally to ensure there are no obvious damages like a burst pipeline or illegal encroachments. If everything seems in order, you should simply wait and see the property value appreciate with time.
Plots of Land Have Higher Resale Value
This is one of the most critical points in the “is it better to invest in land or house” debate: land value rises with time, whereas the resale value of houses decreases drastically.
Even if you can rent a house or an apartment for a constant cash stream, it will continue losing its value. The market value can depreciate due to the house’s obsolete design, antiquated construction methods, and normal wear and tear. The price of your residential unit can also be negatively impacted by the development of new, contemporary projects in the neighborhood.
On the other hand, the value of raw land increases rather quickly. That is particularly true if it is situated in a popular or up-and-coming neighborhood. After all, there will always be a sizable portion of wealthy buyers who favor purchasing acres of land and constructing a bespoke home that meets their needs rather than buying an old house that requires time and money to fix.
So, despite the lack of immediate cash flow, purchasing raw land is a wise decision for people looking to make long-term investments. Moreover, the high resale value will more than make up for the fact that a plot will lie there for a long time without producing any profit.
Land Offers Greater Flexibility
Investment in land offers virtually unlimited possibilities. If building your own house has always been the primary driver behind your real estate purchase, you can do it. Alternatively, you may keep it until its worth increases and sell it to a developer.
Some people will even buy a piece of property to keep cattle on and sell it later if they want. You could even develop a rental home on a few acres to make extra money. Land is a very versatile investment because it has so much potential.
A Piece of Land Is Cheaper to Buy
Purchasing vacant land is far less expensive than buying a home or an apartment. The reason behind this is simple: when you’re buying a house, you’re essentially paying for two things — the lot and the actual building. Thus the answer to the question is it better to invest in land or house is straightforward. Additionally, you won’t really be able to customize the home unless you also perform repairs on the site, which may wind up costing you more money than you intended.
On the other hand, the vacant piece of land allows you to plan a desirable floor layout while leaving room for a backyard garden or family gatherings around a bonfire. In other words, when owning land, you are the master of your ship.
What to Do with Your Land Investment
Once you invest in vacant land, you have numerous options for what to do with it. You could buy and hold onto it and then sell it when its price appreciates. While you wait on its value to increase, you can lease it and earn passive income or actively use it for ranching, farming, or anything else. Another option is to learn the highest and best use of the land and develop it accordingly. If you go down this route, answer the following questions:
- Is the planned usage physically attainable? What can and cannot be built can be restricted due to the land’s topography.
- Is the proposed use authorized? Zoning regulations may apply.
- Does the transaction make sense financially? Analyzing the market is necessary here. You should be aware of the various projects’ construction expenses and their potential for income, such as the rent they might bring in.
- What is the land’s optimal use? The ideal course of action can be decided when you have calculated your numbers and comprehended the implications around the land.
Is It Better to Invest in Land or House: Final Thoughts
The land cost has been steadily rising, a trend that’s anticipated to continue. Due to the imbalance between supply and demand, land prices have increased by twice as much as those of other types of property. Therefore, you should invest in vacant land to produce superior profits.
When investing in such a long-term, tangible asset, you can hold onto it and do something with it when the time is right. This means that you might have to wait for a longer period of time to make profits, but the good news is that owning land costs much less than owning a house — there are virtually no maintenance costs, and you’ll pay only the property taxes. If you’re ready to become a landowner, contact Discount Lots today — we have a vast selection of off-market listings and offer flexible investment property financing!
