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.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
