Thinking of buying land for investment? Read this first.
There’s no doubt about it, property and land are two of the most lucrative and accessible ways to build an investment portfolio and grow your wealth. But is buying land for investment always the best option? And once you’ve bought land what should you do with it? We’ll look at the pros and cons of buying a block of land for investment and how to make the most of your land.
Factors to consider when buying land for investment
Before you start researching land packages and locations, it’s worth considering the purpose, location, quality and even the size of your new block of land and how that will impact its resale value and your return on investment. When considering buying land for investment take into account the following factors.
Whether you’re building an investment property or buying land as an investment, location is everything. When deciding on the right location for your land purchase consider the desirability of the land and if the area it’s in is likely to experience long-term growth — particularly if you don’t intend to build on the property and are relying on long-term capital gains from selling the property in the future.
Zoning determines what purpose or purposes your land can be used for. Each state and territory has its own regulations and zone types which govern what types of developments can be built on different areas of land. In New South Wales you can use the state government’s spatial viewer to check the zoning of an area you’re interested in and use its planning portal for information on planning, zoning and other information.
- Size, practicality and usage
Typically speaking smaller blocks of land are easier to sell than large ones and even if you’re not planning to build on the property now you should consider the needs of a future buyer. If the block is steep, rocky or difficult to develop it may be difficult to sell.
It’s also worthwhile looking into past uses of the land. Maybe it was previously used as an industrial site or as a landfill location. Make sure the property doesn’t have any hazardous materials present which could impact its value and usability.
- Infrastructure and accessibility
Can the land be easily reached by road? If your investment land parcel is only accessible via dirt track this may impact its desirability when it comes time to sell. You’ll also need to find out whether the property has access to electricity, water, broadband and other utilities.
- House and land packages
For investors who want the ease of buying land paired with the benefits of owning a rental property, a house and land package can be an affordable and stress-free solution. For instance, house and land packages with BuildFast only require stamp duty on the land component, plus, while the land is being settled we can prepare your CDC property to ensure you’re earning income from your investment as soon as possible.
Is it for me? When is buying a block of land for investment the right choice?
Buying a block of land may be cheaper than buying a developed property, but that doesn’t necessarily make it the right option for all investors. For those looking for a quick return on their investment, undeveloped land may not be the best choice.
Additionally, without the income of an investment property on the land there’s no cash flow to help cover mortgage repayments and other expenses.
Buying land for investment is typically suited to big-time investors, whether individuals or corporations, who can get by without additional cash flow and have the ability to wait for the property to increase in value over a number of years or even decades.
Buying a block of land can also work for people who can’t afford to build their property yet but want to secure their desired location.
Buying a block of land for investment — to build or not to build?
When buying land for investment the key question is whether or not you’re going to build on the land.
It can be harder to get a loan for vacant land. According to HomeLoan Experts, if you’re buying a block of land and not intending to build on it, banks can deem it as a speculative investment, meaning you’re less likely to secure a loan than if you’re planning to build on the land.
Buying land as an investment is cheaper in the short term. Buying a block of land with no buildings on it is initially cheaper than buying developed land but without a home or building on it to rent out your block of land will only increase in value slowly.
Rental income from building a property on your land will provide cash flow. While purchasing vacant land may be initially cheaper and come with a lower mortgage, without income from the rent you’ll be left covering the cost of the mortgage yourself rather than using the rent to pay off the loan.
You can rent out the undeveloped land in some circumstances. Depending on the zoning of your land you can rent it out as commercial land, for farming purposes or as a parking area or for other non-residential purposes.
The best place to buy land for investment
The best place to buy property for your investment portfolio will depend on your goals. If you want to build on your land the best option is to choose a high-growth area with good amenities that’s in demand with buyers.
According to Domain, the regions of NSW are the best places to invest in property thanks to changing trends and growing demand for regional living. With remote working becoming ever more available and popular, accelerated by the Covid-19 pandemic, and more people than ever looking for a tree-change, the regions are seeing surges in their housing markets. Regional centres like Byron Bay, Parkes, Kiama and Orange of 15% to 26% in 2020.
Rezoning is also a great way to make a profit off your vacant land purchase. If, for instance, you’ve purchased a residentially zoned block of land near a retail or commercial hub you can rezone your property and sell it to a corporate buyer.
Not sure where to find the best land for your investment? We can help! Get in touch to find out more.
Buy the right land and for your investment property and start building your property portfolio the easy way with BuildFast
At BuildFast we specialise in Complying Development Certificate (CDC) properties. Our experienced team can make sure you’re buying a block of land for building an investment property that will see excellent returns and qualify for our ultra-fast 9-month building process.
Our house and land packages can be ready for tenants in 9 months, helping you earn a return on your investment as soon as possible. We can also help with financing thanks to our partnership with property loan experts.
Take the guesswork out of investing in land with BuildFast. Learn more about our process and see how easy it is to get started. Get in touch with us today to start your investment journey!