Property Investing Questions: Should You Buy Land and Build, or Buy Existing Property?

The conventional wisdom and familiar quote often used when property investment is under discussion, is to always consider buying land as a good investment because they are not …

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The conventional wisdom and familiar quote often used when property investment is under discussion, is to always consider buying land as a good investment because they are not making it anymore.

The well-worn phrase has a ring of truth about it but it doesn’t really answer all the questions you might have. So the question is whether you should buy a plot and build a home or do you decide to simply buy an existing property?

Investing in land

There is a financial argument that can support the idea that buying land can turn out to be a more cost-effective way of entering your local property market.

You could buy a block of land and then hold on to it until you are ready to develop and build a home at a later date, which gives you a degree of price certainty and ensure that you do not become priced out of the market at a later date if and when values rise.

Buying a plot and building a house built to your specification on the land can often work out to be less expensive overall than if you buy a ready-made property that reflects the builders land and building costs together with a profit margin.

Owning land without developing it will not generate any income and will also cost you to maintain it, so think about the timescale and if you need to make a return on your investment, you should ideally be in a position to start building shortly after acquiring the plot.

Buying considerations

If you are thinking about buying a block of land in a designated area or on a residential development where building packages or assistance is available, you should be hopeful that some of the basic pitfalls and planning issues have been resolved before it became available for sale.

As a general rule, it is often advisable to purchase land in areas that you are familiar with or when there is a clear and established protocol already in existence as a result of other properties being built on adjacent land.

Always aim to have a clear strategy and plan in place as to what you intend to do with the land that you are buying and how long you expect to take to develop it. Make sure that you evaluate all the costs associated with buying land and developing it, such as confirming how much you need to spend to connect electricity, gas and water.

Availability

The saying that they don’t make land anymore is really only true on a technicality, as there are many parts of the world where dredging and land reclamation is creating more availability and in Australia, new land subdivisions are attracting strong demand.

Only you can decide if you prefer to pay the “retail” price for a property that is already been built, or whether you want to see if you can get your dream home at something more like a “wholesale” price, by buying the land and building the home that you really want at a potentially lower cost overall.

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