Land: Least considered but viable investment option

Though many people believe real estate offers great investment potential, most people think that real estate investing is solely buying homes, apartments or commercial properties.  Just a few think there is another aspect of real estate that most levels of investors can take advantage of. And that is investing in bare and/or undeveloped plots or parcels of land.

Experts say investment in land is good, not just for the sake of it, but for the merits or benefits which that investment comes with.  What this means  for an investor is that there are some reasons for considering land investment as an option in his real estate portfolio.

One of  those benefits is low entry price. Buying undeveloped parcels or plots of land is good because it is almost always cheaper than buying a developed property. All things being equal, a piece of property that has a building on it will be more expensive than one that’s undeveloped. In addition, in a developing economy and city like Lagos, the payment terms are usually by installments, enabling the investor to lock in the price upfront without full payment, while enjoying the potential capital growth.

Flexibility is another benefit.  With a vacant piece of land, an investor has a variety of options on what he can do with it within the acceptable building restrictions. In addition, it’s usually more easily divisible, enabling him to extract partial value while retaining some interest in the remaining for a longer term.

Udo Okonjo, CEO, Fine and Country, says there is minimal carrying cost for investment in land, explaining that  a vacant plot without a property on it usually costs less to own over time. “In some cases,  especially if well located, the land can generate minimal cash flow while you enjoy security of use, from renting out  the plots while holding”, she says.

Long term appreciation, according to her, is another benefit  as vacant land, especially in a gated community or areas with infrastructure, will usually experience strong capital appreciation that exceeds both inflation and devaluation rates at a substantial level, outperforming most stocks over a long period.

“Vacant land can also be an excellent speculative investment with significant appreciation potential. Land in emerging areas (in the pathway of infrastructure and population growth) has a very high potential to go from undesirable to desirable and this offers extremely high returns in the long term for investors willing to wait. This makes it a strong option for families looking to use land investments as part of their retirement or educations investment plan”, Okonjo observes.

Fundamental shifts, she notes further,  like the development of the Free Trade Zone, The Lekki Sea Port, the Lekki Airport and various industrial, residential and mixed use developments can open up the potential of a location and many connecting sub-locations.