Land Speculation is one of the oldest methods of Real Estate Investing. It is also very simple and uncomplicated. It involves buying empty piece of land in its natural state, waiting for a few years and selling same land for profit. In most cases, you do not need to make any improvement to the land. In few cases you may just need to fence the land round in order to make sure it is secure from intruders. This makes it a very simple strategy - no improvements, no repairs, no need of engaging a property management company. All you just need is to buy the land and wait for the price to appreciate, then you sell and take your profit. Yes, it is as simple as it sounds.
Speculation in land if done well, offers a very high potential for profit. However, it also involves a lot of risk. This is because the expected profit is based on the anticipation that in the nearest future, the land will appreciate in value based on future developments such as establishment of an industry, building of new homes, shopping malls and many more. Care therefore must be taken to make sure that there are potentials for growth and development in the area or district of purchase.
There are a few factors you need to consider before choosing a locality for land speculation.
- The first thing you need to do is to find a locality in your neighbourhood which has potential for growth. You may seek for information from the town planning office in your area. If a location has been mapped out for new road construction or new housing or industry construction in about five years time, it will be a good location for speculation.
- Establish the current value of the land. This is usually very difficult since the land is still in underdeveloped area and outskirts of the city where demand for is at the minimum. Hiring a good estate valuer will be very helpful in determining what the land is worth. It is very essential that you do not overprice the land as doing so may result in lower profit or even loss.
- Make sure the land is free from government encumbrances. You can do this by conducting a search on the property at the state or local land office. This will help you to ascertain if the land has been set aside for any government project or not.
- Confirm that the person or community selling the land to you has the right of ownership. This will help you to avoid being scammed by imposters who may claim to be the owners of the land when they are not. This state or local land office (ministry of lands) usually have a record of all lands and their owners.
When all these measures are taken, there is every likelihood that the purchase will be profitable.