Reals estate investors often ask this question:
“Should I invest in property or land?”
“Which option can give me better returns: Land or home investments?”
Land or Home Investments? Deciding factor #1 – Your investment goal
You must have a clear vision of your investment goal. If not then at least ask yourself these questions; Is this property investment to build your own new home? Or are you planning to get a decent return for your livelihood? Or is it an inheritance for your children? Understanding your investment goals is important to choose between these two real estate investment options.
Land or Home Investments? Deciding factor #2 – Cash flow
Since buy and hold is the only investment strategy that can work on lands, it may take a while until investors get their returns on investment. Whereas home investments offer you a positive cash flow as they can easily find tenants and earn rental yields. Home equity line of credit is also another strategy to improve your cash flow.
Understand the importance of cash flow analysis for investment in property here.
Land or Home Investments? Deciding factor #3- Capital investment
Buying a home requires larger initial capital and if at all it turns out to be negative in terms of cash flow then it will be a huge loss. Land requires less capital investment and can get better resale values. But on the brighter side, financing for lands can be difficult whereas homes or flats can easily get loans.
Land or Home Investments? Deciding factor #4- Maintenance costs
Both properties require occasional maintenance. Upkeeping of the flats or house can be costlier as it is often required when compared to lands. Maintenance costs for lands are less and cheaper.
Land or Home Investments? Deciding factor #5- Tax benefits
Getting tax benefits from your real estate benefits depends on which investment option you have chosen. Because when it comes to land, you will get minimum tax benefits and also getting a loan will be hugely difficult. Properties, on the other hand, receive ample tax benefits accounting for the loan options it gets.
Land or Home Investments? Deciding factor #6- Appreciation
The appreciation value or resale value of flats or homes are slower when compared to that of lands. Since houses are prone to general wear and tear, their resale value can go down over the years. Whereas when buying land for investment, due to the demand and supply gap, the appreciation can even double up. So if you are keenly looking for a higher resale value then opt for land investments.
The Ultimate Choice is Yours
Both the investments have their pros and cons. You can use these deciding factors to know what is the best option for you. Help us know what other factors you use to weigh your options for the right real estate investment.
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