How important is the land? Something that few investors give due consideration to, if they did, they would never buy a single apartment in a complex, instead they would buy the entire complex and the land on which it is located.
“Who I am?
I am the basis of all wealth, the inheritance of the wise, the thrifty and the prudent.
I am the joy and consolation of the poor, the prize of the rich, the right hand of capital, the silent partner of many thousands of successful men and women. I am the consolation of the widow, the consolation of old age, the cornerstone of security against misery and misery. I have passed on to children from generation to generation, as a thing of great wealth.
I am the most select fruit of work; credit respects me, but I’m humble. I stand before each man asking him to know me for who I am and to possess me.
I grow and increase in value through countless days. Although I seem asleep, my courage increases, never fails, never ceases. Time is my help and the population accumulates my profits. The fire and the elements that I defy, because they cannot destroy me.
My possessors learn to believe in me; they are invariably envied. While all things wither and decay, I survive. The centuries find me younger, increasing my strength.
I am the foundation of the banks, the food producer, and the foundation of all value throughout the world.
However, I am so common that thousands of people without thinking and without knowing it pass by. “Anonymous
What do you think I am? Have you guessed it yet?
The answer is: Earth.
The land is revalued; buildings don’t. No matter how much you fall in love with a building, no matter how little maintenance it may be, no matter how much rent you may charge, and no matter how many deductions you may claim, the building’s value will depreciate over time.
This is why so many investors burn their fingers with new units or townhomes. The land content of your investment can be only 10% of the purchase price, 90% of which is therefore a depreciating asset. This is the best kept secret in the real estate industry, because what developer is going to tell you, when he can sell 20 units instead of a single house or duplex on the same lot?
There are really only two reasons why you would lose money on real estate.
> The first is greed and,
> Second, it is not doing its homework
Unfortunately, those two things catch 95% of “gamblers”.
Don’t be a gamer.
Greedy investors are often caught up in the “get rich quick” thought and shoot themselves in the foot all the time. As an investor, you should also avoid being manipulated by the greed of others. This is why it is so important to do your homework.
The real estate market is an ever-changing market and while buildings are its main product, land is the real limited asset. People repeatedly make the mistake of paying a premium for a building, which itself is common and replaceable.
It all has to do with supply and demand. Land is a commodity, obviously in limited supply and the demand for which is continually increasing as our population increases. Bricks and mortar are linked to inflation and labor costs, so their price rises, but they are not yet in limited supply: buildings are torn down (sometimes they collapse!) And are easily replaced.
Unfortunately, it doesn’t make sense to just buy land. You need a vehicle to generate income to pay off the debt and the best vehicle for this is a rental property. But knowing that land is the appreciation component, you need to acquire rental properties with the highest possible proportion of land content.
You will always find people who advise you to buy units. They will tell you not to buy lots or large blocks because it will incur property taxes, tenants don’t like mowing the lawn, and it is easier to find tenants for units than houses.
Look behind the cape. The developers make a good profit by selling a series of units with a face value of the land.
Is it any wonder they forget to mention that it is the land that they hold dear?