The advantages of land investment are generally recognized to center about the following:
Investors can use leverage when buying property because they typically only need to pay a portion of the total price in cash at the time of purchase, with the rest financed through a loan or contract that spans several years.
It uses specific aspects of federal tax laws to provide a tax shelter for investors. The ability to deduct interest payments benefits those with low equity in real estate by lowering the actual cost of interest through reduced taxes. Additionally, the capital gains tax provision provides further tax advantages.
It acts as a protection against the impact of inflation. In an economy facing inflation, the property’s total worth increases due to the inflation and real growth, while the investor can settle the owed amount with money that is becoming less valuable over time. The importance of this is highlighted by the fact that the present-day dollar’s purchasing power is significantly lower compared to its past purchasing power. As inflation continues to devalue the dollar annually, accumulating wealth solely through saving earnings from work is not a viable option. Instead, money needs to be invested intelligently in order to outpace the effects of inflation and secure its purchasing power.
Investing in land is likely to provide more stability compared to other types of investments like the stock market. While it may be affected by economic downturns, land values generally do not experience the same level of volatility or unpredictable changes as stocks and other securities. Investing in land is usually viewed as a long-term commitment, unlike the quick returns expected in the stock market. This understanding helps land investors avoid making hasty decisions, such as panic selling during economic downturns, which often lead to significant losses. Land investors are typically willing to wait for several years before seeing a return on their investment.
Investing in land typically does not come with the same issues as owning rental property. There is usually no need for maintenance, rent collection, or significant property management.
It offers a structured savings plan for individuals who may struggle with consistent investing or sticking to a savings routine. By committing to buying land,investors accumulate equity over time. In this context, the limited access to immediate cash can be seen as a benefit. The lack of liquidity, when viewed in this respect, can be an asset.