How to Decide Whether to Buy Land or Housing

If you’re in the real estate market with a bunch of money, it’s a good idea to take a seat and consider what’s best for you and your …

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If you’re in the real estate market with a bunch of money, it’s a good idea to take a seat and consider what’s best for you and your money. Do you want to buy a house? Or do you want to buy land? Can you develop, or would you be looking to lease or rent the land? Where are you, and what kind of value can you expect to see from your location and neighborhood? Are you in an up-and-coming residential or commercial district? Or are you in a village hamlet, or looking to develop outside of the city center?

There are a couple factors to consider before making your choice between land or a home, and they’re mostly based on how much you have exactly, and how much land is worth where you are.

Technically they’re Not Making Land Anymore

Mark Twain famously offered his opinion on the matter with the succinct quote: “Buy land; they’re not making it anymore”. He’s right, in a way – houses can be built and demolished, and buildings come and go, rapidly changing the value of any one place from millions to nothing – especially considering the dangers of a possible calamity – but land tends to hold value in one way or another. And in some places, land can go up in value, provided you keep it protected.

Land reclamation is also a factor to consider: countries that are expanding their real estate market by quite literally turning uninhabitable land, or land unsuited for construction because it was previously reserved, into land perfect for the building of homes, condominiums and commercial districts because of the demands of population growth. However, such private or public undertakings cost a lot of money, and an equal amount of time. Because of that, if you happen to own undeveloped land that has been considered for development, then the value of that land goes up. It’s not usually something to count on, but you can keep it in the back pocket for your children or grandchildren to potentially take advantage of.  

Land Can Be Developed – That Means an Increased Value

If you have the money to develop and build on your land, then you can make the value of your land go up – a home costs more per square foot than land does. If you’re in the market for a property for sale, you can look to places like Property Guru to find listed land ready for sale. If you’re an international investor, land in Malaysia according to Global Property Guide can be a cost-effective investment as it’s still vastly lower per square meter as compared to other developing nations, like Thailand, Indonesia and the Philippines.

But Development Doesn’t Immediately Bring Value

If you’ve bought land in an area away from city centers or in another location where people generally do not live, it’ll take some time to get your newly-developed land ready for moneymaking. Building a home in the middle of a rural region isn’t an immediate asset, and won’t bring you much unless you plan to live in it. Furthermore, development is expensive – and you’re never guaranteed to get a return on any investment, you’ve only got the potential for one.

The closer you build to the city, the more likely it is for you to make a profit off your land – but that also spells out greater upfront costs.

Housing Is Usually Cheaper If You Want To Live In It

If you’re simply looking for short-term cost-effective living space, buying a house is a better way to spend your money than buying land and building on it – after paying all the right taxes, getting a permit and considering all the development fees.

In other words, if you have capital and are looking to expand it, then you can buy land and turn it into more money in the long-term through investment – but if you only have enough money to buy and improve a home, then you’re better off doing that than buying land and building a smaller home on it.

Land Can Cost You If You Can’t Afford It Directly

Land that lies vacant can be a liability – if you bought your land through credit then the interest you pay becomes a fairly sizeable liability and long-term cost without any meaningful return on investment (at least initially).

But if you buy or inherit land, it starts off as an asset – an asset that can grow in value through any number of means, including resource acquisition (oil, gas, precious metals, wood) and the potential for future development by you or an interested party.

In Other Words: Buy Smart

The lesson here is not to buy outside of your own budget – the initial price tag on land kilometers away from the city center may be much lower than the cost of a home within the city, but after you’ve paid for permits, development, construction and upkeep, the costs can pile up quickly. If you’re planning to buy on credit, some other costs in Malaysia according to SaveMoney.my include stamp duty fees, processing fees, advance payments, potential penalties and, of course, the interest rate.

On the other hand, land with higher chances of development can become lucrative – or it can become vacant land that brings value to whomever will inherit it.
 

 

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