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The Simplicity Of Buying Undeveloped Strategic Land
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The secret is out … undeveloped strategic land offers simplicity to investors.
Property that lacks buildings and, sometimes, infrastructure provides an uncomplicated formula for significant asset growth, for several reasons.
Throughout much of history as much as today, investments in real estate are how fortunes are built. But land acquisitions can also be losers, of course. On a small scale, a purchaser of a multi-flat apartment building may find out the lift needs to be repaired or replaced at significant cost. Investors in larger properties such as commercial office buildings or shopping centres might find the tenant market turns downward a year or two after acquisition, bringing an unwelcome and unexpected drop in income and asset value. Occasionally, property that was occupied then abandoned might come at an attractive price, only for the buyer to discover that toxins exist on the land and need to be removed – at profit-killing expense.
Undeveloped land, in agricultural use or simply in a natural state, generally provides a simpler physical situation. There are no aging building issues to deal with, which avoids both atrophying structures as well as environmental toxins. All that needs be disposed of might be some brush and trees, but with green thinking, smart architecture can make the best use of natural resources in a sustainable way.
Other matters of how land investments in the UK are freed of complexity for the investor can be summarised as follows:
No uncertainties about the value of the buildings (or costs). Many factors impact the price/value of built structures. Aging is of course one of them but so too are shifts in regional economies: if a major employer closes down nearby, it reduces the spending power of the employees left behind. With less to spend, homes and retail properties take a hit.
No “brownfields” issues. As is widely reported in the media, properties formerly used for industrial purposes (which can also include car service stations and parking facilities) might have dangerous toxins lurking below the surface of the soil or in the walls and basements of structures. Undeveloped land almost never has such issues.
Use designation/zoning. The strategic land investor quite often (almost always, actually) is looking to achieve a change in use designation (zoning) from the jurisdictional municipality in which the property is situated. There are favourable economic forces that drive land from non-use to use that are arguable less likely to happen when the property is already built (for example, changing a commercial district to residential).
Can develop for current and future market needs, not adapt from old purposes. Along similar lines to a change in use designation, the economics of converting empty land to built property are often advantaged over adapting existing structures to what the market demands today. Homes built 20 years ago will lack the environmental features that are now standard, for example. Or, if a town is in greater need of residences than retail space, empty land can be designated for whatever is most needed.
The task of strategic land site assembly is complex. But when investors work with professionals who have appropriate experience in land site assembly, the process is made much simpler. Contact a personal financial consultant to identify where your best opportunities for alternative investments may be.
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