Monday, December 26, 2011

Buying Real Property For Investment

Generally, or most of the time, people buy a real property because they wanted to move from renting to owning their house. Instead of collecting rental receipts without any house at the end of, say, 5 or 20 years, buying a house through a housing program can make you pay for your house in an installment basis, just like you are renting, but in the end you get the property to yourself.

One of the reasons of a real property buyer, though, is investment. He or she does not necessarily need to live within the house but he or she sees the opportunity of buying another one so that later the property can be sold at a higher price hoping to earn some out of the cash that was paid and the time that will pass. How much interest one can earn after five or ten years will depend on the market value at the time it will be sold.

The general idea is, the land you buy appreciates in value while the construction on it depreciates. Even without anyone using the house, it also has its wear-and-tear, thus, it devaluates as time goes by, whereas the land, regardless of what you do with it, like build a house on it, plant a garden, or simply let it alone as it is, appreciates its value over time. When the time comes that accessibility becomes easier to reach that land, the more the value appreciates.

There used to be hectares of land which used to be valued at 600/sqm. After a decade, when an exit to the expressway was built, it shot up to 25000/sqm. There is another place where a subdivision developer was the reason to pave the way to an exit to the expressway, the land started at 4000/sqm. After 5 years, it is already at 9000/sqm.

So if you want to buy land for investment, choose one that is not yet developed but has the possibility to be later.