Advantages of Investing in Land

Advantages of Investing in Land

The Phenomenon of Land Value Appreciation (Your Money Grows on Its Own)

The main reason is land value appreciation. Land is a finite resource; no one is "manufacturing" more land, but the population keeps growing.

Supply vs. Demand: With a limited amount of land and increasing demand for housing and commerce, land value tends to naturally rise over time.

No depreciation: Unlike a house, which requires maintenance to avoid losing value (painting, repairs, pipes), land alone does not wear out, age, or break down.

Types of Capital Gains

Types of Capital Gains
Purchase: You acquire a house for $1,000,000.
Increase: Years pass and the house is now worth $1,200,000.
Capital Gains: The $200,000 difference ($1,200,000 - $1,000,000) is the capital gain you gain if you decide to sell. This difference can also be expressed as a percentage; in this case, a 20% increase.

Capital Gains from Improvements:
Purchase: You buy a lot for $100,000.
Investment: You spend $20,000 building a new room and renovating the kitchen.
Capital Gain: The total value of the property could increase to $150,000. In this case, the absolute capital gain would be $50,000 ($150,000 - $100,000).
Capital gain due to area development: Purchase: You acquire a home in an area valued at $500,000.

Development: A new park and a public transportation station are built nearby. Capital gain: The value of your home increases to $600,000 due to the improved quality of life and accessibility of the area.