Updating the “Buy Land” message of the ages
Buy Land – You can’t go wrong with Land – You can’t make more land – Land always rises.
If you have not heard someone voice one of the above at least once, then I would be surprised.
Once upon a time wealth was about tools, clothes or other items required for survival, moving on to livestock like sheep, cattle, and horses, etc. Following that, with the rise of irrigation and urbanization over 6,000 years ago, land was added as another form of wealth, and nowadays there are many forms of wealth, like money and shares.
Arguably you could say that land has been the backbone of wealth throughout the ages, and I have seen many investors who advise me they are only interested in buying a house on a block of land, because it is the land that is important to them. I also see spruikers of house and land packages state “you can’t go wrong if you buy land”.
However is it really just about the land? Let’s look at 2 examples
If I took $1,000,000, and bought a house and block of land in Sydney, OR a couple of thousand acres of desert scrubland in the outback, which has the better chance of capital growth? Based on the Buy Land message, it should be the 2,000 acres, not the house and block of land in Sydney. We all know though it will be the Sydney property that will do well.
If took $500,000 and I buy an apartment in a block of 20 apartments, I only own 1/20th or 5% of the land underneath, whereas if I buy a House and block of land for the same price then I own 100% of the land. According to the Buy Land message, when capital growth occurs I will only get 5% of the capital growth on my apartment, and 100% of the capital growth on my house and land. The facts are though, apartment prices may lag behind a house prices, but the percentage gains are the same.
Ok, I know you can see the answer – yes it’s about LOCATION not land.
When you think about it, it’s always been about location. In our agricultural past, land with good rainfall in the right season was always going to be worth more than land in desert areas.
Yet the message has always been “buy land” when it should be “Buy Location” because it is the location which is more important overall.
Even now in the back of our minds we know its location, but for some reason the buy land has infused itself into the way we think about it. If you saw our video on “Scientific Proof Investing Makes You Rich”, then maybe the call to “Buy Land” has been confused with “Buy an Investment Property”
Affordability and Time In the Market
We do know that being able to buy the right piece of land in the right location may lead to more profit if there is a chance to develop the land, but for many it comes down to two things –
Affordability: Can you actually afford the land. If the zoning has already changed allowing development, then nowadays being able to still pick the land up at a reasonable price is difficult, because everyone is aware of the potential, especially the owner.
Time in the market: If the land is not zoned for a higher density, over what time period may that change. The closer you are other higher density areas the better chance you have, but then affordability comes into it. The further out you are then there is a timing issue whether zoning will or will never change.
So next time you are at that dinner party, and someone says buy land, chime in and say Buy Location!!!