Investing in land can be a smart financial move for many reasons. Unlike structures which depreciate over time, land tends to appreciate as population and development grow. Land is a finite resource, yet the demand for it continues to increase. Below are three of the top reasons why purchasing land is a wise investment strategy to consider.
1. Appreciation
Perhaps the number one reason to buy land is its potential to gain value over time. Land itself does not depreciate like the structures built upon it. In fact, location is one of the biggest drivers of real estate value. Desirable locations near growing urban centers or recreational attractions will likely increase demand and boost land prices over the long term.
Even raw land not used for housing or agriculture is likely to appreciate simply due to increased speculative interest and land development over time. According to the Lincoln Institute of Land Policy, the average annual appreciation rate for vacant U.S. land has been 5.21% over the past 70 years (1).
While land values can fluctuate with economic cycles like the housing market, the overall trend has been upward. So, purchasing land, holding it, and selling it down the road is a strategy used by many real estate investors. Timing the purchase right can lead to significant gains.
2. Asset for the Future
Another advantage to land as an investment is its ability to be passed down to heirs. Land’s value does not deteriorate over time like physical structures and buildings. Therefore, it can be retained in families through generations.
Land appreciated over decades can become a meaningful inheritance. The next generation may one day decide to build on the land when the time and budget are right for them. Or they may sell the inherited land and use the profits to fund other financial goals.
Land can also be placed into trusts or estate plans to help future-proof one’s assets. The equity gained in land over time helps build intergenerational wealth. While market fluctuations occur, land itself remains to pass on. Tangible assets like land have historically held value better than paper investments over very long periods.
3. Build on Your Own Timeline
A third major advantage of owning land is the control and flexibility it provides for building a residence or other structures. Having a ready site available means you can build according to your own timeline when budget and life circumstances permit.
Owning the lot outright removes the pressure of acquiring land and building simultaneously. With land already secured, there is more freedom over what, when, and how of construction. Custom-designing a home and carefully selecting all the finishes and features brings great satisfaction.
Securing land ahead of time also locks in the lot location. Finding the ideal lot in the ideal neighborhood can take substantial time and effort. Owning the land eliminates the risk of missing out on that dream location when you are finally ready to build.
With raw land acquired, preliminary design stages can begin without pressure or deadlines. This allows ample time to research designers, architects, and contractors when ready to start full construction plans. The homebuilding process can proceed at a thoughtful and enjoyable pace.
Key Takeaways
– Land as an investment appreciates over time and can generate significant gains when sold
– Owning land passes on an inheritable asset that holds value across generations
– Having land ready provides flexibility to build on one’s own timeline
Conclusion
For many investors, land represents a tangible, long-term asset with sturdy appreciation potential. Unlike depreciating structures, land itself does not wear out or lose intrinsic value. Properly selected land in desirable areas is likely to increase in demand over the decades. Land passed down to future generations remains a steady heirloom and nest egg. Finally, owning land offers the freedom to develop it on your own schedule. The ability to build the perfect custom residence makes land ownership well worth the initial investment. When the time and budget align, your dream home rises from the ground you had the foresight to secure.
References
1. Ganning, Joanna P. and Tighe, J. Rosie. “Appreciation of Undeveloped Land in the United States.” _Lincoln Institute of Land Policy_, 15 Dec. 2020, [https://www.lincolninst.edu/publications/articles/2020-12-appreciation-undeveloped-land-united-states](https://www.lincolninst.edu/publications/articles/2020-12-appreciation-undeveloped-land-united-states). Accessed 9 Feb. 2024.
