Skip to main content

Selection tips before you purchase the land site for building a rental property


Visit our website
Some areas have lands that are highly over priced but the rent does not measure up. Investing in such an area will take longer time to recoup investment. The property will not also gain so much value after some years. Don’t invest in areas where you know your property will suffer rent void, give lower rental rate and/or get low property value appreciation.
Below are some things to consider before buying a land for rental purposes.
1.  Compare land price to rental rate:    A good investor should be able to compare rental rates to land prices in different areas. This will give them an idea of where best to invest and get good returns. The bulk of the difference in the cost of similar real estate properties in different areas is usually the difference in cost of bare land in the different areas. In most cases, cost of labor and materials of the building structure is similar in a particular locality. Sometimes it is better to acquire a parcel of land in Locality-1, a seemingly expensive area, build and rent it out for a good high price than buy a very cheap piece of land in Locality-2 that shares boundaries with Locality-1 , only to spend similar labor and material costs for building and end up with very low rent prices. Likewise, some areas have disproportionately high land prices but cannot command commensurate rent prices. Do the math before investing.
2.  Check the rate at which the land is gaining value: Compare land prices 5 years ago to current price. Also check if there is any upcoming infrastructural projects, businesses or if developments of any kind are coming to the area in the near future. These are some of the factors that will drive up the prices of land.
3.  Is the area attractive to the middle to high income earners?  Some areas are fast developing due to the kind of nice houses being built in the area while others may be due to infrastructural developments, nearness to the beach or proximity to industries/businesses. An area with beautiful houses, good infrastructure and security attracts middle to high income earners who will pay good rent and buy more real estate thus driving up demand and property values in the area.     
4. Good road network and accessibility to shopping: Smooth paved roads, interconnected road network and good accessibility to markets and shopping areas are some of the factors that encourage renters and real estate buyers to come into an area.
5.   Flood free area: Ensure the area has good drainage system or at the least does not flood during rainy season.
6.   Future projections of supply vs. demand for land in the area: A careful analysis of an area will reveal its potential to develop fast, hence attract more people into the area. When the demand for new land or houses in the area is higher than supply, then scarcity sets in and drive up prices.
7.   Proximity to corporate areas: If you have apartments close to an area with lots of business offices, it tends to rent out faster, because people like to live not too far from their place of work. It saves them money on transportation.
8.  Within a gated estate: Getting a property within a gated estate or community, have a good chance of renting out fast. This is because of the added security it provides.
9. Hoodlums’ free area: some areas are so dirty and harbor lots of thieves and hoodlums. Responsible people don’t want to live in such areas for the fear of being  molested or robbed.


Important considerations before you invest a loan or personal savings in rental properties

What I Wish I Knew Before Investing In Rental Properties

 Investing in real estate properties: Successful startup and growth strategies

Disclaimer
Any views or opinions represented in this blog belong solely to the blog writer/owner and do not represent those of people, institutions or organizations that the writer/owner may or may not be associated with in professional or personal capacity, unless explicitly stated.
Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual. All content provided on this blog is for informational purposes only. The writer/owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.
The writer/owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information.
Comments are welcome. However, the blog writer/owner reserves the right to edit or delete any comments submitted to this blog without notice due to:
- Comments deemed to be spam or questionable spam.
- Comments including profanity.
- Comments containing language or concepts that could be deemed offensive.
- Comments containing hate speech, credible threats, or direct attacks on an individual or group.
The blog owner is not responsible for the content in comments.

This blog disclaimer is subject to change at any time.

Labels

Labels:

Comments

  1. UnknownJuly 16, 2019 at 7:52 AM

    This information can save you serious money. Thanks!

    ReplyDelete

Post a Comment

Other interesting posts

Effective Strategies To Increase Your Property's Value

  Visit Our Website  Improving a property to make it more appealing to potential buyers or renters is a sound investment tactic. There are several cost-effective ways to add value to your home, from simple cosmetic updates to more significant renovations.   One of the easiest ways to increase a property's value is by enhancing its curb appeal. Freshening the exterior with a new coat of paint can instantly make the house look more inviting. Additionally, well-maintained landscaping, including neatly trimmed lawns and colorful flowers, can leave a positive first impression. If local regulations allow, consider adding extensions for an extra room, bathroom, garage, or carport, which can significantly boost the property value.   Key areas within the home, such as the kitchen and bathroom, are crucial to potential buyers. Upgrading the kitchen with modern countertops, cabinets, and appliances can be a wise improvement plan. Similarly, renovating the bathroom by replacing ...
Post a Comment
Read more

Factors To consider Before Buying A Real Estate Property

     Visit Our Website  Investing in real estate needs careful planning and timing of the market if it is for business purposes because you want a good return on investment (ROI). So, factors to consider include but are not limited to market research, financial analysis, and some local factors. The first thing to do is to think about your long-term goals for the property. Are you buying it as an investment, a primary residence, or a vacation home? Your intentions can influence when the right time to buy is for you. If buying for business purposes(rentals or for resell) try to avoid speculating on short-term market fluctuations. Real estate is typically a long-term investment, so focus on the property's long-term potential rather than short-term gains. Research the current real estate market conditions in your preferred area to buy. Look at trends in property prices, inventory levels, and market forecasts. Is it a buyer's market or a seller's market? Seek advice from ...
Post a Comment
Read more

When To Sell Your Real Estate Properties

   Visit Our Website  Real estate properties are income spinners that provide cash flow for the investor. For a good investment, the rent should be used for capital recovery or paying off the mortgage in 10 – 13 years. Earning a passive income monthly or yearly without doing much work is a good way to become financially free . So there must be a very good reason when an investor decides to sell one or more of his houses. The following will be a good reason to sell a house; the house is not performing very well compared to the capital invested, there is too much delay in cash flow, the interest rate is going too high, the house maintenance is becoming too high, the house is highly dilapidated that renovating it will not make much sense, there is always too much rental void, the need for a new house, move investment from a particular area or neighborhood, the government regulation is not conducive, there is high sales value appreciation, the property is not within easy re...
Post a Comment
Read more

Different Financial Markets And Asset Classes For Investment

  Visit Our Website  When it comes to investing, different financial markets and asset classes - such as the money market, capital market, venture capital, and real estate - serve distinct purposes and offer varying levels of risk and return. Understanding the functions of each investment type is crucial when deciding where to allocate your funds. Ultimately, the best choice will depend on your financial goals, risk tolerance, knowledge of the market, and the duration of your investment.   The  money market  typically offers low-risk, short-term investments that are highly liquid, making it an ideal choice for those seeking to preserve capital with minimal returns. Common money market instruments include Treasury bills, certificates of deposit (CDs), repurchase agreements (repos), and commercial paper. While the returns are modest, the safety and accessibility of these investments make them suitable for conservative investors.   The  capital market , o...
Post a Comment
Read more

Establish a Clear Exit Strategy Before Investing in Real Estate

  Visit Our Website  Investing in real estate is one of the most significant financial decisions you will make. Whether purchasing a home for personal use or acquiring an investment property, it is essential to approach the process strategically. A clear, well-defined exit strategy ensures that your investment aligns with your financial objectives and protects your capital over the long term.   Why an Exit Strategy Matters Before finalizing any property purchase, establish a clear exit strategy; this is your plan for how and when you will sell or divest from the asset. An effective exit strategy helps mitigate risk and ensures your investment remains adaptable to changing market conditions. Key questions to consider include: Can the property be sold   easily ?  Properties in prime locations generally offer higher liquidity and  greater  market appeal. How quickly do similar properties sell?  Understanding the average time on the market for compara...
Post a Comment
Read more

How Socio-Political and Economic Situations Affect Real Estate Prices and Values

  Visit Our Website  Real estate prices and values are heavily influenced by socio-political and economic conditions. These factors impact the demand and supply of properties, shaping market dynamics and ultimately affecting property values. Understanding how these external forces impact real estate is crucial for investors, homeowners, and policymakers. 1. Economic Conditions: The economy's health is a good determinant of real estate prices. During periods of economic growth, higher employment rates and consumer confidence increase the demand for properties, driving up prices. Conversely, during economic downturns, high unemployment, and reduced consumer spending can lead to decreased demand and lower prices. Inflation can also affect real estate: it raises the costs of construction, leading to higher property prices, while low interest rates make mortgages more affordable, boosting demand for real estate. This pushes up the prices of real estate. 2. Political Stability and G...
Post a Comment
Read more

What You Should Know About Real Estate Speculation

Visit our website Real estate speculation  is the purchase of a real estate asset (building or land) with the hope that it will become more valuable in the future. It is a passive approach to making profit based on forecasts  and educated guesses of future real estate market trends not substantiated by firm evidence . Speculation leaves no room for the speculator to influence the profit outcome,  because there is not much you can do as a speculator to drive, influence or accelerate the appreciation of the land or building(s).  Real estate speculation can be likened to investments in stocks or sports betting in this respect. On one hand, real estate investments generally involve a degree of speculation on the potential for appreciation in the value with time due to changing market conditions (demand versus supply) and/or improvements in face value (infrastructural, social, economic, security) in the locality. On the other hand, it is important to note that ...
Post a Comment
Read more

Investing in real estate properties: Successful startup and growth strategies

Visit our website In general, those who embark on life endeavors with a good strategy have the odds stacked in their favor to succeed. When starting off as a real estate investor (full time or as a side hustle), a good strategy or road map is outlined below: Stage 1 : Startup  Stage 2 : Growth Stage 3 : Financial Freedom Stage 1: Startup You can start with your personal savings or with a loan. Note that you need to be careful about starting a business or real estate investment with loans. Discuss with your financial planner/adviser before making the decision to invest a loan on rental property. There are 3 options for stage 1: a.   Purchase a piece of land and resell for a profit. Reinvest the original capital and profit. Search for good deals on land/property purchases (buy at a price below current “fair market value”), this way, you make some profit on the day you close-out the real estate purchase. b.   Purchase a piece of land an...
1 comment
Read more

The Relevance of a High Oversite Concrete/Foundation of a House

Visit Our Website Oversite concrete (often referred to as German floor by the laymen) is a layer of concrete used to seal the earth under the ground floor of a house. Before pegging and digging the foundation of the proposed building. The first thing is to determine how high the oversite concrete of the house should be raised above the natural ground level. Note that there will be many different levels on a sloped land. It is very important to check the topography of the area. More important is the level of the land with respect to the road. If the road is tarred, use it as a reference for determining how high to fill the land when the building is completed for proper grading of the yard for surface drainage. But if the road is not tarred, endeavor to put into consideration how high in the future you think the road will be filled or excavated during construction and use that as a guide or reference. Having a good knowledge of how high the land should be filled to ena...
Post a Comment
Read more

What I Wish I Knew Before Investing In Rental Properties

Visit our website Most often than not, a lot of people seeking investments in rental properties are being discouraged due to the hassles involved in collecting rent from tenants. Some tenants are also known to have a poor maintenance culture and as such, leave the house in a deplorable state after moving out. Such tenants have failed to recognize that a lot of work, time and money went into getting the property to the enticing finished state that attracted them to rent the property in the first place. It should be noted that not all tenants are like this, but the disturbing truth is that many are.   Despite this disturbing reality of rent collection hassles and misuse of rental properties by some tenants, there are a lot of ways to minimize this:      1.  Never be in too much hurry to rent out your property Some property owners are in a hurry to rent out their apartments or commercial spaces, so do not carry out proper investigation on the prospect...
3 comments
Read more