What is Land? And Why It’s Important to Investors

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    What is land?

    With over 34 million hectares of arable land in Nigeria alone.

    Statista said something more interesting, Nigeria has an arable land area of 34 million hectares: 6.5 million hectares for permanent crops, and 28.6 million hectares of meadows and pastures.

    This means that land is a physical asset with many uses.

    For example, land can be used for agriculture, forestry, housing, and even recreation.

    In other words, when it comes to investing, the land is often seen as a safe and stable investment.

    That is because the land is a finite resource, and there’s only so much of it and they are not making it anymore.

    This makes it a valuable commodity that can appreciate in value over time.

    There are many different types of land investments, from raw land(vacant land) to developed land.

    Not only that.

    The land is a key asset class for investors.

    It’s a finite resource with numerous advantages, including the generation of income, and the diversification of portfolios.

    Campassland said that Land is the well-behaved, ‘golden child’ of investing. Land can’t be stolen or destroyed. No extra effort from you is required.

    There’s nothing to protect, maintain, or renovate. There’s nothing to ‘do’. Land in its natural state will always be worth something.

    Since there are many different types of land investments, they all share the same goal.

    More importantly, Land is a finite resource. That means there’s only a certain amount of it on earth, and it’s not renewable.

    That makes it a valuable commodity, and one that investors are always looking to buy.

    Therefore, what are the risks and rewards of investing in it?

    In this actionable guide, we’ll explore the different types of land investments and their benefits.

    If so, what is land, and why it’s important for investors?

    • What is Land?
    • Why is land a valuable commodity?
    • The risks and rewards of investing in land
    • How to invest in land
    • Common myths about land investing

    What is land?

    Land is the dirt that we walk on.

    Or simply put:

    It’s also the buildings and infrastructure that sit on top of it.

    So it’s both an immovable and a movable asset.

    There are many different types of land.

    There’s,

    • Agricultural land – This is used for crops, grazing, or forestry.
    • Residential land – This is used for houses
    • Commercial land – This is used for businesses
    • Industrial land – This is used for factories and other large-scale production facilities.

    According to Investopedia, one of the biggest advantages of commercial real estate is attractive leasing rates.

    In areas where the amount of new construction is limited by either land or law, commercial real estate can have impressive returns and considerable monthly cash flows.

    Industrial buildings generally rent at a lower rate, though they also have lower overhead costs compared with an office tower.

    Not only that.

    There are even special types of land that are used for specific purposes like national parks, military installations, and airports.

    Why is real estate a valuable commodity?

    But why is land so valuable?

    To understand that:

    First, when you buy a piece of land.

    Remember that you are buying the right to use the land for an indefinite period of time.

    That is because the rights that come with land can be transferred to other people, even after many years of ownership.

    That makes land a stable, secure asset that can provide long-term ownership.

    According to entreprenuer, There will always be value in your land, and value in your home.

    Other investments can leave you with little to no tangible asset value such as a stock that can dip to zero, or a new car that decreases in value over time.

    Such an example above makes land a stable secure asset that can provide a long-term source of income.

    The risks and rewards of investing in land

    There are a few main risks that come with land investing and they are all interconnected.

    Let’s take a look at each of those risks.

    First,

    • Lack of liquidity

    Unlike other investments, most types of land don’t have a secondary market.

    That means that you can’t sell your land quickly if you need the cash.

    You might not be able to sell it at all if no one is interested in buying it.

    That also makes it hard to diversify your holdings.

    • Appreciation risk

    When you buy a piece of land, you want it to appreciate in value.

    Right?

    But, sorry.

    …It’s not always a sure thing.

    The value of land is closely tied to nearby economic conditions.

    Like:

    1. Location
    2. Development within the axis
    3. Prospects about the area
    4. Document

    If the economy is doing well, then properties on the land will be worth more.

    If the economy is doing poorly, then the opposite is true.

    Investopedia said something interesting about the appreciation rate of investing in land.

    Real estate investors make money through rental income, any profits generated by property-dependent business activity, and appreciation.

    Real estate values tend to increase over time, and with a good investment, you can turn a profit when it’s time to sell. Rents also tend to rise over time, which can lead to higher cash flow.

    How to invest in land?

    There are three main ways to invest in land.

    You can purchase land that is already been developed and has tenants living on it.

    Or you can invest in a REIT that invests in the land.

    Or you can buy undeveloped land and build something on it…

    Another option will be that you buy undeveloped land and wait for it to yield much higher returns over some years and sell it with a higher profit.

    With call such type of investment – Land Banking

    More importantly, if you purchase developed land, then you need to make sure that it’s in an area with a strong, growing population.

    And that the tenants on the land are paying their rent on time.

    And that the land has the potential to appreciate in value.

    If you buy underdeveloped land, then you need to make sure that you have the financial resources to build on it.

    You also need to make sure the land is in an area with a future.

    Some people buy land in areas that will be developed in the future.

    Thereby, don’t make the mistakes of other investors who buy land that doesn’t have a strong future.

    Common myths about land investing

    There are a lot of myths out there about land investing, and a lot of them are based on fear and misunderstanding.

    Let’s take a look at the three most common myths about land investing and why they are false.

    • Land is an all-or-nothing investment

    A lot of people think that all you can do with the land is to buy it and sit on it until it appreciates in value.

    And yes, that’s not true.

    You can find ways to increase the value of the land, like by finding tenants to lease it.

    And you can also find ways to decrease the risk, like diversifying your holdings.

    • You can’t get a loan to invest in land

    You can definitely get a loan to invest in land.

    Some banks even specialize in lending against land.

    You just need to make sure that you have a strong plan for the future of the land.

    • Land is a safe investment

    Like any investment, land comes with some risk.

    We have already talked about some of the risks above, but there are others too.

    And they don’t just affect individual investors.

    They can also affect the economy as a whole.

    If a large number of people buy land they can’t get a return on it, then that can impact the economy as a whole.

    Conclusion

    Now that you already what is land?

    And how it’s a valuable commodity to investors, and how you can make it a great investment?

    But it’s also important to understand the risks and rewards of investing in land to make sure that you get the most out of it.

    That way, you can make sure that your investment is a smart one that pays off over the long term.

    And if you are already wondering about how to go about investing in land.

    To ease your confusion, the good news is that it’s what we do.

    We’ll help you map out the best location to invest with higher returns

    You can simply get in touch with us here – I want to invest