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LAND AS AN INVESTMENT... by J. McGregor Colt
My Summer in a Garden Throughout man's history, land has been a vital force. On it he built his home, and, in it, he planted his food. Often, when he staked out his land, he had to fight to retain it. As the years passed, he learned to mine the land for minerals. From these valuable materials, he made more efficient tools and gained better productivity and wealth. Land gives man life-sustaining water. Land has also been the cause of numerous wars, as man's numbers and ambitions increased. When land was abused or neglected, man suffered. When land flourished, man flourished. Land has made people rich, happy, secure and healthy, more so than any other commodity at their disposal. Yet, much misunderstanding remains concerning land values... Seldom does one factor account for the total increase in land values. In reality, a combination of factors is usually at work. Of prime importance is the law of supply and demand. There is just so much land available. We cannot manufacture more, and values respond directly to supply and demand. An important element of profit in land investment is time. We should not expect miracles immediately, although profits often accrue in varying degrees right from the start. Moreover, unlike an automobile or piece of machinery, land does not lose value from the moment of purchase. On the contrary, it will most likely go up in value from the very beginning of the transaction if it is a sound investment. In short, land generally appreciates. Most other things decrease in value through usage and age. Most of us know someone who has sold a house or lot for more than it originally cost. Reason: the property increased in value, as other land owners in the vicinity boosted its investment value through activity and improvements. This is the course that good real estate investments follow. Every day, millions of Americans are, unknowingly perhaps, engaged in land investment transactions. The money they place in savings and loan associations, banks and insurance companies is, to a large degree, invested in real estate. Profits from these investments form the backbone of dividends paid to bank book or policy holders. If these companies can do it for an individual, why can't the individual do it for himself? The location of the land is of prime importance. Is it in the path of progress? Is it near a city, good transportation, schools, shopping, a lake, seashore or resort area? If so, it should gain value faster than the average rate. True land value depends upon local progress; the use to which the land is put; and the general activities of the area. The reason for this is that the above conditions usually dictate how many people move in, build, invest and spend. If land has a healthful climate near recreational activities, a reasonable assumption is that it will increase in value. This is especially true if three other conditions exist: easy access; commercial and industrial opportunities; and favorable opinion of other investors regarding the community in which the land is located. People prefer clean suburbs, in the country, at the seashore or mountains, because they want to live pleasantly and indulge in hobbies such as fishing, hiking, boating, golfing, biking, skiing and wind surfing. Properties which make these activities possible and offer a progressive business climate command attractive prices, and rising values. Population growth both quantitative and qualitative is to be reckoned with. Good growth patterns provide the firm base for profitable investment in the real estate of a specific community. If land purchased is in the path of growth, profits should accrue from the beginning. Every added activity in the overall development can lead to increased value of a particular property. For example, each carload of goods shipped in or out of a locale constitutes traffic that enhances land values. Investment benefits also stem from improvements a developer makes. These can range from
water lines and electricity, to streets. Activity means growth, and growth is
progress.
An important element of profit in land investment is time. We should not expect miracles immediately, although profits often accrue in varying degrees right from the start. The time factor and the timing of the purchase frequently have great bearing on how much the profit will be. What amounts to a 25 per cent profit in three years can become 50 per cent in the fourth year. Once land appreciation begins, it often gathers impetus and steadily increases. When the entire area gains momentum, property values rise along with it. If the investment is in a new community which has already demonstrated healthy growth, the land should increase in value at a good rate. This is because it was bought at the start of the rise. Studies should be made of every aspect of the development, with due regard for the all-important time factor. If a project is sound, the earlier an individual gets in on it (or on bordering properties), the better his chances for a sizable profit. One should be patient with land investments as with stocks, bonds, or other assets. Most of us have a built-in desire to own a piece of land. When a parcel is deeded to us and we walk on it and call it our own we feel deep satisfaction and a sense of genuine security. Ownership also confers a degree of dignity; a feeling of having roots and membership in the community. In most areas, there is the added incentive of profit. And profit to land investors has been generated by an immutable law which says: Real estate values must rise in areas where population increases at a rapid rate. If the present rate of growth continues, which seems almost certain, many people will make a great deal of money on land investments. Individuals can take advantage of this uniquely favorable situation, in proportion to their ability to invest. It is necessary to be in a position to ride the upward wave and then the door is open to participation in the profit of the future. People with the desire to invest can generally be divided into three groups: 1) those who make decisions rapidly and with confidence, 2) those who are more conservative, and 3) those who are overcautious. Individuals in the first group are quick to recognize a favorable set of circumstances. They move in confidently on a rising real estate market and usually reap greater returns on their investments than those in the other two groups. This is because they buy at a relatively low figure. And they have the foresight to buy before the other groups move in. As a result, many have become very wealthy dealing in land. The more conservative second group tends to stand by and watch the parade for awhile. Then they fall into step. They still profit, but obviously not as much as the first group, which has already taken off some of the "cream". Also, the first group may be holding on to "prime" investment properties which offer even greater profit potential. The third group gets the smallest return on its money. Values may be moving towards a peak by the time these overcautious investors enter the picture. Consequently, their profit margin is lower than that of the other two groups. However, even this third group can make comparatively large profits through judicious land purchases. The opportunities remain in abundance, and will continue far into the future. Regardless of which group typifies your investment philosophy, you must have a plan. This plan should be based on study and intelligent consideration of the underlying facts of the situation at hand. Choose a knowledgeable, experienced real estate industry professional and only then will investors be on safe, profitable ground.
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Upcoming articles cover everything from current market conditions to increasing your home's "Curb Appeal"
.
"No man feels more of a man in the world if he have a bit of ground that he can call his own. However small it is on the surface, it is four thousand miles deep; and that is
a very handsome property..."