One of the best ways to earn money and get rich is through real estate. But not many know how to effectively invest so they end up losing instead of gaining profit. If you are interested in land investing and are a complete beginner, establishing your knowledge about real estate investments would be the first thing and the smartest thing to do. Read down below and get to know these 5 things you should keep in mind before starting your land investment journey!
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Establish your Financial Capacity
Before starting out your land investment, you have to evaluate your financial capacity first. Knowing what you can buy and what you do not is one of the pillars and stepping stones of starting a strong investment. Here’s are some tips on how you can analyze and evaluate your financial capacity:
- Calculate and DetermineYour net Worth. This can be as simple as combining the total worth of all your assets (e.g., cash on hand, house, car, investments) and subtracting the total worth with your liabilities such as loans, credit card debts, mortgage, and utility bills (if calculating personal net worth). After subtracting the number of liabilities from your total worth of assets, the sum will be your net worth.
- Track Down your Expenses. This can be time-extensive for some but this is one of the simplest ways to evaluate your financial capacity. Determine the amount of your income and track down where, when, and what you spend from your income. Doing this will help you establish self-discipline and discernment of what are your needs and what are your wants, thus, helping you save more money while ramping up your financial capacity.
After determining your financial capacity, you may wonder how you will establish a good and withstanding financial capacity. Establishing a good financial capacity is as simple as saving more money than you spend, saving for future spendings such as emergencies, loaning or borrowing money you are sure you can pay back, growing your money with investments, and protecting your money with insurances and the like.
2. Investing in Land is Not Just for the Super-Rich
There is a notion among people that those who do land investments are extremely rich. But this notion is simply not true. If you are renting a house or an apartment, chances are, you met with your landlord. Now, are all landlords extremely rich? The simple answer is no. Investing in land is not just reserved for millionaires. Even a middle-class person can invest in land and gain cash for land as long as they know what to do and are willing to extend their full efforts and time.
3. Employ a Macro and Micro Approach When Investing in Land
Investing in land requires you to employ different approaches to ensure good profit returns. Employing a macro approach means you need to look out for major macroeconomic fluctuations and you need to keep in mind the macro factors in investing in land such as demographics, crime rate, familiarity, and pro-tenant/pro-landlord policies.
The micro approach involves looking out for local market issues and local demographics like the ease of transportation, distance to local schools, local crime rate, and nearby amenities such as hospitals, parks, and commercial hubs.
4. Small Investments Could Also Yield Big
Do small investments mean small returns? The answer is no. Your small investments can give you big returns. In land investments, if you buy smaller patches of land that are near to each other, you could buy one after the other while your investment grows big.
Think of it this way: you buy area A. After a month, area A’s land value has soared high, and this will enable you to buy area B, and so on and so forth. The result? You have multiple patches of land that have a great land value.
Here’s an analogy for you to understand more clearly: you plant a seed (small investment), you take care of it earnestly, and you’ll grow a tree (big returns).
5. Evaluate the Tax Benefits Eligible for the Land You are Purchasing
Tax benefits are present even when purchasing lands. Since this is a great thing for investors like you, evaluating tax benefits that are eligible and suitable for the land you are buying is one of the most important things to do. Some of the tax benefits available are the following:
- Mortgage Interest
- Deductible Real Estate Taxes
- Points
- Private Mortgage Insurance
Since tax benefits entail more tax calculations, it can be complex. So it is better to consult a friend or peer who has experience in taxation to help you or better hire an accountant to do the taxes for you.
Final Say
Land investing is not an easy thing to do. It requires time, effort, and resources for it to grow big and give you big returns. From evaluating your financial capacity to evaluating taxes eligible for your desired land, we hope you’ll have a headstart for your land investment journey