20 Reasons You Should Own Land
Investing in land has been called “the original hedge fund.” It’s one of the most lucrative ways to protect your assets. Here are 20 reasons you should own some land:
- Real Estate Values Increase Over Time
The value of real estate increases over time, even when the economy is stagnant or declining. The reason for this is simple—when an area is desirable, more people want to live there and therefore real estate values increase. In a declining economy, however, the opposite happens; fewer people want to live in undesirable areas and so property values decrease.
- Real Estate Has A Stable Value
Unlike stocks, which have no intrinsic value, real estate has a stable value because it is attached to tangible assets like buildings. Even if the economy tanks, land will still be worth something as long as it’s attached to a building that someone wants to live or work in. If you buy land now, it could be very valuable later on.
- Land Is Not Subject to Speculation
Land can’t just disappear overnight. Unlike stocks and other investments, it takes a lot of effort to destroy a piece of land. That means that once you own the land, its value remains relatively constant, regardless of whether the stock market crashes or the economy gets worse.
- The Returns from Land Are Tax-Free
Real estate returns are not taxed at all by both federal and state governments. This makes investing in land especially attractive to those who hold land for income purposes, such as landlords.
- There Is No Risk of Bankruptcy
With real estate, there is no risk of bankruptcy. As long as you pay your taxes and maintain ownership of the property, you aren’t going to lose any money. This protects your equity from creditors, making it a useful investment if you’re worried about losing your assets.
- Land Holds Its Value in Poor Economic Times
As mentioned above, land values tend to remain relatively steady during economic downturns. That means that land is a good place to put your money when times get tough, because you won’t see much (if any) return on other risky investments, but you’ll always have a safe place to park your money.
- Land Can Be Sold at Anytime
Unlike stocks, which must go through a liquidation process before they can be sold, land can be sold at anytime. For example, if you need cash fast and don’t want to sell your house or other assets, you can quickly transfer ownership of the land and collect the profit.
- Land Is Relatively Inexpensive Compared to Other Investments
Compared to other types of investments, real estate is affordable. For example, you can buy a small plot of land for under $100,000 while the average price of a home in America is over $200,000. And unlike other investments, you don’t have to keep the land forever to make your investment worthwhile.
- Land Is Better Than Marketable Securities
Land is better than many other forms of investment because it is more tangible. While stocks are intangible, land is directly connected to real things like buildings and houses. This makes it less susceptible to fluctuations in the stock market.
- Land Is More Tradable Than Marketable Securities
When you purchase a piece of land, you can quickly and easily remove yourself from the investment. If you decide that you don’t want to continue owning the land, you can simply transfer it to another owner.
- Land is Easier to Valuate Than Marketable Securities
To properly value land, you only need to know how much it would cost to build a similar asset on the land. Unlike other forms of investments, there is no need to estimate future earnings based on past performance. With land, you can just look out the window and tell how much it’s worth.
- Land is Cheaper Than Marketable Securities
Unlike other forms of investments, land is significantly cheaper than stocks. For example, the average price of a single share of Apple stock is currently around $600. Meanwhile, the average price of a square foot of land in the US is only around $16. That means that buying the equivalent number of shares of Apple stock is roughly three times more expensive than purchasing a square foot of land.
- Land is Less Volatile Than Marketable Securities
Like other forms of investment, land tends to be more stable than stocks. While stocks can fall drastically in value over short periods of time, land usually stays flat, or even appreciates slightly, over the long term.
- Land Is Easier to Manage Than Marketable Securities
If you’re looking to invest in land, it’s easier to do so because it is less volatile. If you find a piece of land that you love and want to buy it, you can do so without having to worry about major changes in the stock market.
- Land is Easier to Liquidate Than Marketable Securities
Due to its stable nature, land can be sold far more easily than other forms of investment. For example, if you want to liquidate your investment, you can sell it to a developer who wants to build a new residential neighborhood or office complex on it.
- Land Has A Large Margin of Safety
By definition, land must exist somewhere, meaning that if you own land, you own a piece of the world. Since land cannot disappear completely, it is considered to be a safer form of investment than other forms of investment.
- Land Offers A Higher Return on Investment Than Marketable Securities
In general, the return on investment from land is higher than that of other investments. For example, if you buy a piece of land for $100,000, you can expect the land to appreciate in value to around $150,000 after ten years. That means that you’d receive a 5% annual rate of return, which is significantly higher than the 1–3% you might earn on stocks.
- Land Offers A Lower Risk Than Marketable Securities
While stocks are inherently risky, they also offer a high potential reward. Land, on the other hand, offers a lower risk profile than stocks. If you buy land and then decide that you don’t want it anymore, you can simply resell it to someone else. This means that you can take a chance on a stock with little downside risk, compared to taking a gamble on a piece of land.
- Land is Easier to Find Than Marketable Securities
Since land is tangible, it is relatively easy to locate and identify, unlike stocks. Since there is no central database where people can list their land holdings, finding land can be difficult. However, if you can find a piece of land to buy, you can rest assured that it exists somewhere.
- Land is Easier to Understand Than Marketable Securities
Unlike stocks, which require a fairly sophisticated understanding of financial theory, land is relatively straightforward. All you have to do is look out the window and you’ll be able to tell what the land is worth.
Final Words
These are just a few of the reasons why you should consider investing in land. While land may not be the best investment for everyone, it does offer a large margin of safety and a potentially high return on investment.
