Purchasing land is often considered to be a slow investment since it does not always guarantee regular cash flow. This is in the event that the buyer does not develop or lease out the plot for commercial use. However, this should not be the case. Land remains to be one of the few asset investments that guarantee consistent appreciation.
Land as an investment option
Every investor should consider purchasing land whenever they are looking for an investment option. All they will be required to do is to identify land in a suitable location. For example, there are prime plots of land that you can buy around Geelong. The city, which is located southwest of Melbourne, provides a vibrant location to purchase both commercial and residential plots. As an investor, you may consider purchasing a commercial plot on which you may later choose to develop a commercial business complex. You may also decide to utilise the land by erecting commercial apartments that you will later sell or lease out.
Appreciation vs deprecation
A majority of assets begin to experience depreciation within their first year of purchase. Examples include machines and vehicles. Upon resale, it is unlikely that they will fetch even an equal price to that which they have been purchased. That is unless the market experiences tremendous inflation rates. For example, when a company purchases a transport truck, they estimate its expected years of service. This helps to determine the truck’s annual depreciation rate. The rate of depreciation is then included as a loss for the company as it calculates its annual gross and net profits. This is not the case when dealing with land. Such assets experience continuous appreciation. A parcel of land sold one year after it has been purchased is likely to fetch a higher price than that which it has been acquired for. The statement holds even when a market does not experience any inflation.
The factor of an increased asset base
The size of an investor’s asset base is essential to their financial well-being at all times. The same holds for businesses. Assets come in handy whenever a person is entangled in debts because the assets may be liquidated to repay the loans. Assets also improve an investor’s credit score and increase the amounts of loans that they are eligible for. The larger the asset base, the higher the loan amounts to be granted because assets provide excellent security for loans. Land may be considered to be the best security for a loan. This is especially true due to its unique characteristic of continued appreciation. In the event that an investor is unable to repay their loan, the land provides a vital lifeline that they may use to settle the loan without putting other assets at risk of being liquidated.
Purchasing land continues to provide investors with an essential means of retaining their money without the risk of the money losing its value through inflation. It is also an effective way of diversifying their investment portfolio while still increasing their asset base simultaneously.