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How to Make Money Investing in Vacant Land?
How to Make Money Investing in Vacant Land?
Apart from purchasing a house or condo as a property investment, vacant land can also be counted. Some people think it’ll take up to ten years for land price to rise or to gain profit or break even. Sometimes, purchasing a big piece of land requires a huge amount of money and land investors must have cash that is readily available called cold cash. Besides, some parents tend to invest in land as they believe its price will certainly have risen in the future. They collect large amounts of land and pass them on to their children, and that heritage property may later turn into a big sum of money when the land price goes up. Follow this article to find out how to buy vacant land that may possibly create added value in the future.
Land-buying Strategies
1. Buy and Hold
It’s a strategy to wait for property prices to rise because of city expansion. Why wait for a price increase, the landowner may rent out the land to others to gain extra income such as convenience stores, car parking, gas station, shop, farming, etc. A landowner can collect all rental income to pay tax while waiting for selling land. This strategy suits long-term investors who own cold cash, or they may buy land and leave it as an inherited asset to their children. This strategy encourages buyers to hold land for at least 5 years and it’s recommended to select land where a city will be expanded over there or where there’s a tendency for land development in the future such as road cutting through, transportation pass, government office located, big project located, etc. Moreover, investors should buy land at the price equal to the estimated price, or it’s even better if buying price is lower than estimated.
2. Buy a big plot of land and split sell to make a profit (Divide and Profit)
This strategy fits well-off people or property developers who make projects or allocate land for sub-purchasers to buy and build houses. Profits come from the difference in land price; the price when buying a big plot of land at the size of Tarang wa (1 Tarang wa is equal to 4 square meters) will be cheaper than buying a smaller piece. And it’s hard to find buyers as it needs a tremendous amount of money unless the property developers convince the sellers to cut down the price to be affordable by the buyers. After that, big land will be divided into smaller ones to sell to sub-buyers next and the price per Tarang wa is certainly higher than selling big land. This strategy fits short-term investors or those who want circulating funds such as housing estate which is not suitable for sub-investors. The key is once split land into small pieces, it’s advised to sell half of the total, and save the rest to sell in the future.
Techniques for land selection
It’s quite challenging for sub-investors to buy the land in downtown or central business area as it needs a super large sum of money. It’s better to select suburban land where city expansion is on the plan. Before making a decision, please study and explore extensive information because buying land is a great deal of investment and you should buy it in cold cash. If you pick the wrong land, you probably won’t gain profit as much as expected. Here are some techniques to buy land for investment.
1. Select land on the road, not blind land
Blind land is absolutely cheap but nobody will buy land without an entrance and exit. Those who buy it are mostly neighboring landowners and the price will be certainly undersold as people rarely buy blind land. Even though land on the road is more costly, it has self-entrance and more opportunity to develop and progress than remote land.
2. Select land in community or nearby
There’re two formulas to buy vacant land near community sources; Formula #1, that land must be situated no farther than 48 km from the community center with over 500,000 population. Formula #2, that land must be situated no farther than 8 km from the community center with over 50,000 population, and the condition that the future city expansion will take place on that land (see population growth rate in that area).
3. Select land offered in a limited area
It means the land is ready for use right away such as land on the road, utilities like water and electricity are reachable, etc. Thus, it causes an increased number of populations in that area and so land is in high demand resulting in the rise in the land price.
4. Select land with an opportunity for profit growth only
The method is you should survey the probability of some Government Public Benefit projects to see which area will be under development plans; for instance, railway construction, double-track railway, BTS, new built road, expressway, motorway, pier, industrial estate, etc. The construction of those infrastructures must be somewhat appeared to ensure that the land you have bought, will sooner or later make a profit. Take your time and don’t rush into the buying decision because of rumors or fraud news.
5. Select land from City Plan, Soil Quality, and Environment
Before making a decision, it’s advised to study the city plan of the land you’re going to buy and check color zones identified in that area. In that way, you’ll be able to estimate land price and utilize the land fully and properly. Each land is categorized by color zones according to construction laws and restrictions. Study details of the City Plan from the article “Getting to know ‘City Plan’ with Color Zones that Investors should know” at https://www.scb.co.th/th/personal-banking/stories/city-planning-color-zones.html
you can consider whether that land is worth investing and suitable for commercial sales. It’s also better to realize soil quality if it enhances agriculture, including observing land environment such as air pollution; otherwise, it’ll be challenging to sell the land with that problem. Additionally, you need to go to the Land office to verify the land boundary including obligation, study information from the Expressway Authority of Thailand and Department of Highways to check whether your land is under expropriation or located in the Aeronautical Radio Service area, or contact the Electricity Authority to check if your land is near high voltage wiring area.
6. Select a square-shaped land
Land in square shape is considered the highest value. A rectangular plot of land with its width connected to the road is also a good land because people can make full use of it more than any other type of land.
7. Select moderate size of land
It’s not a good idea to buy a small piece of land as it’s useless and wastes the investment. On the other hand, a big piece of land is high priced and requires huge costs, and it’s hard to find buyers. Most buyers are property developers or those with bargaining power so the trading price is more in the buyer’s hands. So, what size of the land is best? In fact, a land in the city should be at least 600 – 800 square meters (150 – 200 Tarang wa) to buy and build a condo later, or the area of 2 – 3 rai in close proximity to the main road and BTS passing by which can build an office or a hotel, or the land of 800 – 1,600 square meters (200 – 400 Tarang wa) to build condo or apartment in accordance with market demand.
Be ensured to explore detailed information prior to buying a vacant land to avoid risk or minimize risk, and lose large amount of money without knowing whether you can sell your land or get your investment cost back. If you’re about to buy land but need some amount of money, apply for ‘My Home My Cash’ loan. You still own your house and will get the highest loan amount of 20 MB with 30-year installment payments. See details at
https://www.scb.co.th/th/personal-banking/loans/home-loans/my-home-my-cash.html
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