The advantages of land ownership

How important is the land? Something few investors give proper consideration to, if they did, they would never buy a single apartment in a complex, but instead buy the entire complex and the land it sits on.

“Who I am?

I am the foundation of all wealth, the heritage 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 handed down to children through generations, as a thing of great wealth.

I am the most select fruit of work; He respects my credit, but I’m humble. I stand before each 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 the population accumulates my profit. Fire and the elements I defy, cause 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 the banks, the producer of food, and the foundation of all value throughout the world.

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

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

The answer is: Earth.

Land

The land appreciates in value; the buildings don’t. As much as you fall in love with a building, however low maintenance, however much rent you can collect, and however many deductions you can claim, the value of the building will depreciate over time.

This is why so many investors burn their fingers on 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 a single house or duplex on the same lot?

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

> The first is greed and,

> The second thing is not to do your homework

Unfortunately, those two things catch 95% of ‘stakers’.

Don’t be a player.

Greedy investors are usually 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 your homework.

Real estate is a constantly changing market, and while buildings are its main 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 is continually growing as our population increases. “Bricks and mortar” are tied to inflation and labor costs, so their price goes up, but they’re not yet in limited supply: buildings are torn down (sometimes fall!) and easily replaced.

Unfortunately, it doesn’t make sense to simply buy land. You need a vehicle to generate income 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 acquire 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 land taxes, tenants don’t like mowing lawns, and it is easier to find tenants for units than houses.

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

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