Investing in Land – What you Need to Know

Land investment is one of the most solid forms of investment, as unlike other ventures the value of land does not usually fluctuate.  There are many reasons why investors choose to invest in land, and with research, patience and a degree of luck they can make very lucrative returns by doing so.

Why invest in land?

There are a number of reasons why investors might want to invest in land.  Firstly, the value of land will almost always increase over time.  There may be periods during which the land decreases in value, for example, when there is an economic recession; however, in the long-term, there is usually an upward trend.

Land can increase in value at astonishing rates and usually provides a much better return than other forms of investment. Even the best tax-free accounts – such as ISAs – cannot match the percentage increase in value of a piece of land if the investment has been wisely chosen.

Another reason that investors look to land is because it is a flexible form of investment.  Left alone the land will continue to increase in value, however it can also be used for property development or farming.  As well as the value of the land increasing, investors can make a regular return by renting it out while they own it.

Perhaps most significantly, with a burgeoning world population, the demand for land will always go up.  Every year the squeeze on the housing supply increases, and land that has not previously been developed is used to build new homes for people who would otherwise be restricted to rented accommodation.

Therefore the demand for land will never cease.

What buyers need to know before investing in land

Before investing in land, buyers should ensure that it is unencumbered (definition); i.e. there are no mortgages, charges or caveats attached.  Similarly, they should carry out searches to make sure that it is not likely to be contaminated or affected by Local Land Charges.  They should also be sure of the tenure of the land; whether it is freehold or leasehold.  Freehold land is owned by the proprietor indefinitely, however, leasehold land is only owned for a certain period of time, for example 80 or 100 years.

Buyers who plan to develop their land also need to make sure that they are aware of planning regulations that may affect their plans.  A piece of land which has planning permission for development is likely to be worth a lot more than one which doesn’t.  Similarly, they should ensure that they are aware of any plans for development in the local area which may increase or reduce demand for the land they plan to buy.

Consider studying several investment books on land before moving ahead with the process of viewing properties. 

Investing abroad

As well as at home, investors can make money by investing in real estate abroad.  Land abroad is often cheaper than at home, and it often costs less to build homes on it.  These homes can be sold for holiday homes, making a good return for investors.  However, even just buying a holiday home abroad can be a good form of investment; the value of the property should continue to rise and it can be used both to provide a holiday retreat and rented out as a holiday home to provide additional income.