Real estate can offer great investment potential. While most people think that real estate investing is solely buying homes, apartments or commercial properties, there is another aspect of real estate that most levels of investors can take advantage of – It’s investing in bare/undeveloped plots or parcels of Land.
There are several merits of choosing to invest in land. Below are a few reasons to consider land investment as an option in your real estate portfolio especially in a fast growth location like Lagos.
LOW PRICE ENTRY:
One of the key benefits of buying undeveloped parcels or plots of land is that it is almost always cheaper than buying a developed property. All things being equal, a piece of property that has a building on it will be more expensive than one that’s undeveloped. In addition, in a developing economy and city like Lagos, the payment terms are usually in instalments enabling you lock in the price upfront without full payment, while enjoying the potential capital growth.
With a vacant piece of land, you have a variety of options on what you can do with it within the acceptable building restrictions. In addition, it’s usually more easily divisible enabling you to extract partial value while retaining some interest in the remaining for a longer term.
MINIMAL CARRYING COST:
A vacant plot without a property on it usually costs less to own over time. In some cases, especially if well located, you may be able to generate minimal cash flow while enjoying security of use, from renting out the plots while holding. (***This is usually not feasible within gated estates)
LONG TERM APPRECIATION:
Vacant land especially in a gated community or areas with infrastructure, will usually experience strong capital appreciation that exceeds both inflation, and devaluation rates at a substantial level, outperforming most stocks over a long period.
STRONG SPECULATIVE POTENTIAL:
Vacant land can also be an excellent speculative investment with significant appreciation potential. Land in emerging areas (in the pathway of infrastructure and population growth) have a very high potential to go from undesirable to desirable and this offers extremely high returns in the long term for investors willing to wait. This makes it a strong option for families looking to use land investments as part of their retirement or educations investment plan.
Fundamental shifts, like the development of the Free Trade Zone, The Lekki Sea Port, the Lekki Airport and various industrial, residential and mixed use developments can open up the potential of a location and many connecting sub locations.
The returns seen across board in numerous residential estates across Lagos (from Ajah to Epe, Lekki schemes 1 & 2, gated estates like Twin Lakes, Banana Island, Parkview, Osborne, Scheme 1 & 2 and other far flung areas) bear anecdotal and research based evidence to the desirability and potential of land investment as possibly the proverbial golden egg. We believe it’s a real golden opportunity if well chosen and the process of acquisition managed effectively.
Investing in undeveloped parcels of land is a great starting point to creating wealth in real estate. If you have money to invest, find the right land that meets your requirements, and investment budget, and seek professional support to ensure the due diligence and long term potential checks out
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