There’s no doubt that buying vacant land can be a great investment. But as with any investment, it’s not for everyone. Unlike many other investments, land doesn’t pay any income, doesn’t trade on any exchange and typically requires specialized knowledge to pick a winner. But that doesn’t mean that you should overlook it as an investment.
Large tracts of land can cost millions of dollars, but on a relative basis, land is typically cheaper than many other investments. You’ll always pay more on a per-square-foot basis for developed properties than vacant land, and you’ll also have fewer ancillary costs. When you buy land, for example, you won’t have to deal with utility costs, a mortgage or property improvements and maintenance.
Illiquid Market
For most investors, an illiquid market is a negative, not a positive. After all, if an asset is illiquid, that means it is difficult to sell. However, this often opens up opportunities for investors in the know. Since many investors are scared away from illiquid investments like land, it can often be purchased for below-market valuations. An astute investor with an understanding of the appreciation potential of a piece of land can benefit from its illiquidity as it will keep away competitive offers.
Although you may run into zoning or other regulations if you choose to develop it, restrictions on a piece of vacant land are typically few to none. Other than the paperwork required to transfer the title of the land to your name, you generally won’t have to file any additional forms with any regulatory authorities.
Tangible Asset
Unlike stocks, bonds or mutual funds, land is a tangible asset. While you can bend down and touch the actual ground that you will own if you buy a vacant lot, you’ll never be able to touch your actual mutual fund. Even a stock certificate is merely a legal document indicating ownership and not an actual, physical portion of a company. When economic times turn difficult, investors tend to cling to physical assets rather than financial ones, something that helps support the long-term value of land.
Low Risk of Damage or Destruction
If you buy a plot of vacant land, there’s little to worry about in terms of damage. As your land has no structures on it, there’s no risk of fire, property destruction or “acts of God,” such as hurricanes. Certainly, vacant lots aren’t completely without risk, as squatters or vandals can litter or deface your property. But you won’t have to worry about the destruction of completed buildings on your vacant lot, which can cost money, time and lost revenue, even if you have insurance.
Limited Availability
One of the most famous observations regarding land as an investment is that “they aren’t making any more of it.” Unlike houses, which are built by the thousands every year, all the vacant land in the world already exists. Sure, some developed properties may be razed and turned into lots, but with extremely limited exceptions, there won’t be any more land “built” for investors to purchase. Although there is certainly a lot of land available, the fact that the supply of land is ultimately limited helps contribute to its value.
Risks
Although there are many reasons why buying vacant land can be a good investment, it’s not without its risks either. Some of the main risks include the following.
Land Can Be Hard To Value
As land isn’t traded on an active exchange, it can be hard to get a concrete value for it. Thus, it can be hard to know if you are overpaying for it when you buy it, especially if you aren’t an expert in land valuation. It can also be hard to know what’s a fair price to sell it at.
Land Doesn’t Generate Any Income
Unlike stocks, which can pay dividends, or rental properties, which generate monthly checks, land doesn’t pay any income. If your land doesn’t appreciate over time, you may never see a return from your investment.
Can Be Hard To Sell
If another buyer never materializes for a property you want to sell at the price you want, you may never realize a profit. Even under the best conditions, it can take weeks or months to sell even a desirable vacant lot.
Requires Additional Cost To Develop
While vacant land may appreciate all on its own, one of its greatest benefits is the opportunity it offers for development. A luxury condominium complex built on a vacant lot, for example, may dramatically improve both the current and future value of your land – but it may come with a large cost as well. But if you’ve spent all of your investment money on the land itself, you may not be in the position to improve your lot and make it more valuable.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
