Why Owning Land is a Must for Your Investment Portfolio
In today’s volatile economy, investors are looking for safe havens to invest their money in. The current economic landscape has made short-term investing challenging, especially with the high inflation rates across various sectors for goods and services – an increase of 6.6% from a year ago. This is why more investors are looking to expand their investment portfolio to include land. Owning land does not only hedge against inflation but also helps you maintain a balanced portfolio overall. In this article we will look at why owning land is ideal for your portfolio.
Diversify your investment portfolio
Regardless of your investment capacity, diversification is intrinsically linked to risk management. Rather than putting all your proverbial eggs in one basket, a diversified portfolio includes investments within and across asset classes. This means that on top of stocks from different market sectors, it’s best to complement this with a different asset type that’s tangible and has intrinsic value, such as land.
Since there’s no universal formula for how diversified your portfolio should be, you should have a knowledgeable expert to help you make informed decisions and meet your financial goals. Financial advisors are licensed for specific products, ranging from stocks and bonds to land and real estate. They have the analytical and accounting skills to assess your financial situation so you can identify where and how to invest, as well as learn how to manage and enhance your financial performance.
Maximize land appreciation
While stocks can easily be liquidated, you cannot rely solely on fluctuating market prices. Land has steadily grown in demand since it’s a commodity we cannot make more of. As more and more land is needed for agricultural, industrial, and residential use, the higher its value increases over time.
Average prices for farmlands have accelerated to a growth rate of 6% in the past two years, while residential and commercial land have an average price growth of 3% to 5% annually.
Earn income in various ways
If you simply wish to increase your passive income opportunities, you can look into long-term strategies like buy-and-hold and leasing. The former requires you to do nothing more than to purchase property and hold onto it until it offers you optimal returns, for example when its surrounding area gets developed and drives up its value. Leasing on the other hand provides a steady cash flow from farmers and business owners paying rent on a monthly or yearly basis.
But if you’re someone who likes to be more actively involved in increasing the value of your investments, you can develop the raw land into rental properties, houses, and commercial buildings. Aside from considering the land location and zoning, the year-on-year increase in construction costs introduces another aspect to factor in when it comes to for-profit land development. The 14.1% increase in construction costs stems from labor scarcity, supply chain delays, and wage pressure. Nevertheless, the large up-front costs of land development can still be balanced out by increasing property values, tax breaks, and deductions.
Achieve long-term security and stability
Buying and owning land has a long-term payoff that ultimately outweighs the demands. As discussed in a previous article on land as an investment, we outlined how we help investors achieve long-term security and stability by offering you a wide range of payment options—whether you choose to pay in full and get a discount, or utilize the in-house financing with low monthly payments. The purchase process is guaranteed to be safe and secure as we ensure all our properties have clear titles with no issues or hidden costs.
We also value transparency by providing you with the property details regarding location, access, zoning, utilities, and titles. This way, you will save time and effort when visiting, purchasing, and eventually owning the perfect land match for you, helping you focus on the other investments in your diverse portfolio.
Written by Rowann Jolst for LandElevated.com