The Pros and Cons of Land Speculation Real Estate Investment
Depending upon your real estate investment experience, you may or may not be aware that there are five categories of real estate investment.
- Land speculation
- Single-family homes
- Multifamily properties
- Commercial and industrial properties
- Retail shops and shopping centers
Over the next several articles, we will discuss the advantages and disadvantages each category presents, and hope to impart some knowledge about each that might be helpful to the real estate investor and others seeking to learn about real estate investment property.
Land Speculation
Purchasing vacant land that has the lowest basic value and turning it into a pyramid of values that includes everything from commercial sites to parks is what land speculation real estate investment is all about.
The key to land speculation is due diligence. Investors must determine the pattern of growth in the community and tie that together with the future infrastructure planned by the community. When circumstances are favorable, the advantage is that there can be little risk to this type of real estate investment if the real estate investors have the time and carrying ability.
The primary disadvantage of land speculation is that local governments commonly change plans for future development, or cancel future projects altogether. Moreover, long-term real estate investing in land can be difficult and expensive. Taxes can increase substantially; building restrictions or moratoriums can limit or prohibit reasonable development; utilities brought to the site may be charged against the property owner; and so on.
We will discuss single-family homes real estate investing next time; stay tuned.
