What Are the Pros and Cons of Owning Land?
Land isn’t as passive as you think.
Land isn’t as passive as you think.
We have been highlighting how great of an asset land is for some months now.
Unfortunately, there are no such things as a perfect asset. They all have pros and cons that investors must deal with.
In this article, we are looking at the pros and cons of owning land.
While land is a great financial asset, owning it is harder than most people think.
Let’s find out why.
Pros of Owning Land
1. You Get All the Upsides of Land as an Asset
When you own land, you directly benefit from all the upsides of land as an asset, namely:
The fact that it is a finite resource with growing demand
It has very low volatility
It has great average returns (5–11%) per year
It is uncorrelated to the stock market
It is a tangible asset
It appreciates in value with inflation
2. You Can Use the Plot as You Please
Most people that buy land don’t buy it for its financial properties. They buy it to actually use the land.
There are plenty of things to do with land, such as growing food, using it as grassland for cattle, building a house, building a shop, or growing a forest (depending on the law).
When you own land, you not only own a great asset that increases in price. You also own a tool you can make more money with.
Cons of Owning Land
1. It’s Expensive
The first problem is that it’s expensive to buy.
The price depends on the nature of the land (agricultural, residential, commercial), but it will cost at least a few thousand euros for one hectare.
Investors frugal with risk-taking may not want to just invest such a big amount in one single asset. If you want to be safe, don’t put all of your eggs in the same basket.
2. It Takes Time
Unfortunately, buying land is not as easy as buying a shirt.
The buyer will have to do some research to find the type of land they desire, then negotiate with the buyer.
After that, both of them will have to make an appointment with a notary to record the sale.
You will be lucky if you manage to conclude a transaction after 30 days. Often, it takes up to 90 days, if not more in certain cases.
3. There Are Fees to Pay
You will have to pay at least the notary fees.
Since most land sellers go through a broker for help, it’s likely that you will also have to pay the broker’s fees.
If you manage to buy from the buyer directly and don’t use a broker or a land management firm to assess the value of the land, then the fees will be kept at a minimum.
However, if you’re not a professional, it’s not recommended to do everything yourself.
4. Mandatory Management
Once you own the land, you have to watch over it at least once a month, to make sure that no one is illegally using it.
You also have to maintain it, or lease it to someone that will use it for themselves (like a farmer, if it’s farmland).
Owning land doesn’t demand as much time and attention as having tenants in real estate, but it’s not 100% passive either.
5. Owning Land Is Highly Illiquid
Finally, because land is difficult to buy, it’s also difficult to sell.
It will take you at least 30 days to find a buyer for your land, go to the notary, and receive the proceeds of the sale.
It’s not really practical if you find yourself suddenly in need of cash.
How LandEx Solves the Cons of Owning Land
At LandEx, we quickly realized that while land was an amazing asset, the numerous barriers to owning it meant that it wasn’t easily accessible.
When you invest in land through LandEx, you don’t have to manage it, go to the notary, or wait to buy and sell.
The process is instantaneous, you can invest and sell your investment in one click, and the fees are kept to a minimum.
Invest in land with LandEx today, at landex.ai.
This article should not be considered investment advice.