The advantages of land ownership

How important is the land? Something that few investors give due consideration to, if they did, they would never buy a single apartment in a complex, they would buy the entire complex and the land on which it stands.

“Who I am?

I am the base of all wealth, the inheritance of the wise, the thrifty and the prudent.

I am the joy and consolation of the poor, the prize of the rich, the right hand of capital, the silent partner of many thousands of successful men and women. I am the consolation of the widow, the consolation of old age, the cornerstone of security against misfortune and misery. I am transmitted to children through generations, as a thing of great wealth.

I am the most select fruit of labor; He respects my credit, but I am humble. I appear before every man asking him to know me for who I am and possess me.

I grow and increase in value through countless days. Although I seem inactive, my value increases, it never fails, it never ceases. Time is my help and population accumulates my gain. Fire and the elements I defy, because they can’t destroy me

My owners learn to believe in me; they invariably become envied. While all things wither and rot, I survive. The centuries find me younger, increasing in my strength.

I am the foundation of banks, the producer of food, and the foundation of all value throughout the world.

However, I am so ordinary that thousands of people without thinking or knowing pass by.” Anonymous

What do you think I am? Have you guessed it yet?

The answer is: Earth.

Land

Land appreciates in value; buildings don’t No matter how much you fall in love with a building, no matter how low-maintenance, no matter how much rent you can collect, and no matter how many deductions you can claim, the value of the building will depreciate over time.

This is why so many investors burn their fingers with new units or townhomes. The land content of your investment may be only 10% of the purchase price, 90% of which is therefore a depreciating asset. This is the best kept secret in the real estate industry, because what developer is going to tell you when they can sell 20 units instead of just one house or a duplex on the same lot?

There are really only two reasons why you would lose money in real estate.

> The first is greed and,

> The second thing is not doing your homework

Unfortunately, those two things trap 95% of the ‘bettors’.

Don’t be a player.

Greedy investors are often locked into “get rich quick” thinking and shoot themselves in the foot all the time. As an investor, you must also avoid being manipulated by the greed of others. That’s why it’s so important to do homework.

Real estate is a constantly changing market, and while buildings are its primary product, land is the true limited product. People repeatedly make the mistake of paying a premium for a building, which in itself is commonplace and replaceable.

It all has to do with supply and demand. Land is a commodity, the supply of which is obviously limited and the demand for which grows continuously as our population increases. “Bricks and mortar” are tied to inflation and labor costs, so their price goes up, but they’re still not in limited supply: buildings are torn down (sometimes toppled over!) and easily replaced.

Unfortunately, there is no point in simply buying land. You need an income generating vehicle to pay off debt and the best vehicle for this is a rental property. But knowing that land is the appreciable component, you need to purchase rental properties with the highest proportion of land content possible.

You will always find people who advise you to buy units. They will tell you not to buy land or large blocks because you will incur property taxes, renters don’t like to mow grass, and it’s easier to find tenants for units than houses.

Look behind the cape. Developers make a healthy profit by selling a number of face value units of land.

Is it any wonder they forget to mention that it is the land that is appreciated?