“It takes considerable knowledge to understand the extent of one’s ignorance.”
So goes an impactful saying that reflects human tendency to approach the unknown with doubt and trepidation. Today’s personal finance or investment scenario is a great example of how knowledge or lack of knowledge can influence our decision-making process. The first thing that comes to your mind when you think about investment instruments like fixed deposits, provident funds, equities and stocks, mutual funds is an overriding principle. The principle is a product of continuous messages that come our way through ‘advisors’ be it family , friends, colleagues, financial media and the internet.
What are your thoughts when someone mentions land as an investment instrument? (Chances are that it is not the most positive of reflections for many wannabe investors).
Does ignorance play a major factor in this perception?
“Resorts and Cities”, the entity behind the world class Longonot Gate and Makuyu Ridge Luxury Golf Resorts and a leading property developer company well known across the East African region with its base in Nairobi, Kenya will make an attempt to dispense some myths about investing in land and inform our readers of the best practices to adopt and pitfalls to avoid when it comes to reinforcing your investment portfolio with land as an asset class.
Let’s take the example of an individual who wants to invest money to satisfy long-term goals in solid investment assets which will combine great returns with lower risk. While real estate will crop up as a possible option, there are various factors which make it seem unattractive. The volume of investment required in purchasing a holiday or a weekend home might seem too high. For a salaried individual, this involves heavy and lengthy financing options which will put a constraint on the quality of his family life. Adding to this, the murky reputation of the housing industry, non-transparent and long-drawn legal paperwork makes matters worse.
Let’s focus on an oft-ignored product in real estate that is land. Investment volumes are lower than other real estate products and returns are stable and are in the high category bracket if the locations are chosen correctly. Let’s get into details so we can explore the investment category to its full potential.
Land investment includes different kinds of potential investments like:
Residential development land: Land which is predominantly used to build houses. These plots can be used to build stand alone houses or apartment buildings.
Commercial land: Land whose intended use is commercial in nature like office space rentals or sale.
Farm land: Land that is typically devoted towards agriculture, so if you plan to cultivate on it, then invest in the farm land in accordance with its fertility level.
Land investment, like any investment option comes with its own set of advantages and challenges, which will depend primarily on your personal investment goals. The main goal of purchasing land is that it is a tangible asset and because of a constant and steady increase in demand, the returns are more assured over time. Land has better resale value with comparatively lower cost than other investment instruments.
Another advantage is that land is available at most locations and in different sizes; this makes it easier to invest in small portions and keep increasing the investment according to your savings and ability.
Entering into land investment can be substantial due to many reasons. Few reasons why you should think about investing in land are:
• It is ‘Hands-off investment’; You don’t need to worry about too much of an extra cost for the upkeep of the area. With land investment, you only have to worry about its management or minimal maintenance to prevent encroachment.
• Future plans; With vacant land, you will have many options like re-selling the land, building your house, building commercial property or convert it into farm land.
• Value addition; For long term Land investment is more affordable. With less need for maintenance, you will save a considerable sum of money.
However, land investment can be tricky and also fraught with risks. In order to ensure safety of your venture, you will need to be mindful of a few things before investing:
Budget: Before you start research on your land investment options, take time to pan out your budget.
•Make a checklist and evaluate your savings and income to begin with.
•The amount you are willing to invest After all the calculations estimate how much amount you
will invest in land and keep in mind any legal or maintenance costs.
Research: This is probably the most crucial step in successfully investing in land. Exploring and collecting information regarding the investment is an essential step in making the right location and developer choice. Learn more about market trends and the news related to the area you are interested in. This information will add up to your overall knowledge regarding the sector and will aid your decision-making.
Market trends: Investigate further on the recent market reports and trends in the real estate sector. Keep an eye out for news related to price, popular investment plots or areas, investment options, type of land investments and details on whom to contact.
Pricing: When you are planning your different plot options, compare them on the basis of the amount and the quality they offer for that amount.
Features: A master planned development can be a game changer. For example, Longonot Gate & The Makuyu Ridge, leading Golf Resort Cities in Kenya located in Naivasha and Makuyu which are now bustling with commercial and residential properties. Longonot Gate & The Makuyu Ridge are world class Golf Resorts with integrated communities which includes well planned modern infrastructure such as roads, ICT connectivity, water supply, sewerage systems, power connections as well as other economic, leisure and state-of-the-art social amenities
Government policies or legal issues: The plot may be under litigation or may be due for a government project.
Zoning: Also note that a few areas may be categorized as forest land or can be in a coastal regulation zone. Investigate and enquire about these factors before you invest.
Location: Plots situated near a well-developed city or an airport, railway station or business sector will be a great investment. Try to invest in areas with proximity to such sectors, this will ensure maximum future returns. Even tourist spots can be good investment destinations. If you want to steer clear from these variables, then make sure you invest in Longonot Gate or Makuyu Ridge, leading Golf Resort Cities which both provide quality basic amenities at an affordable cost.
Workforce and labour: If you are planning to build a house or commercial property on the land or sell it to a developer, keep in mind the potential for employment prospects. If the plot is near a developed segment, the employment options will be aplenty.
Public transport and amenities: If you are planning to buy land in a location/place away from the cities hustles, it’s best to invest in projects like the Longonot Gate & Makuyu Ridge Luxury Golf Resort Cities which are connected by ultra-modern transport systems which include the Standard Gauge Railway and adjacent to the countries major Highways. The Luxury Golf Resort Cities also offer commercial amenities, Golf courses, Hotels, Hospital, Schools, Shopping malls, Sports centers, Cabro road networks, Universal ICT connectivity, Perimeter electric fences and 24 hour security and other amenities.
Scope of growth: Always invest in land where you see possibility of growth and development. This judgment will be easier if you thoroughly research your options.
Plan out your long-term goal: Land is not a liquid asset and the efforts are considerable when it comes to finding a buyer at a fair price. Make sure you have an alternative source of income or savings that you can bank upon during times of crisis. Your land investments will gain on capital appreciation when you sell the land. Long-term goals like child benefits or a retirement corpus are more suited to land investments. Planning will help you maximize returns and turn your venture into a success.
How long can you stay invested?
Resorts and Cities Developers have the unique experience and expertise to provide comprehensive analysis of not just one component of the project, but also the fundamentals of the larger Luxury Golf Resorts, communities and operations, as well as the interrelationship between Golf and other amenities within our mixed-use projects. Through the integration of the core hospitality services of Resorts “n” Cities, our firm can offer comprehensive analysis that is unmatched in the industry.
Remember, turning ignorance into knowledge and action is more a factor of your approach rather than purely focusing on the negatives and challenges of possible outcomes.
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Resorts and Cities is a Trusted Developer & Partner in Property Investment.