One of the most frequent questions first time home owners are face with is: should I buy investment land before a first house? After all, buying land and selling land can be quite important. Well, the answer to this question is a matter of pure priorities.
Here, there are two things at play; one being investment, where you buy land for the same reasons. The other factor is owning a home, a place to hang a hat after a busy day and enjoy quality time with the family. To buy land for investment sure seems like the most prudent choice but well, it might not always be so.
Let’s get into some economics now, shall we?
As tempting as buying investment land seems, there are a lot of downsides to it. I f the land location is in a rural setting, the optimality of the investment reduces. The appreciation rates of its value are pretty low and the costs of developing it like water, road and septic connections are quite high.
Secondly, the speculative nature of land prices make you depend on your ability to predict future price. In the meantime there are taxes and insurance expenses on the land that you have to deal with.
Buying a house after all is not such a bad idea as it may act as an investment in case you sell in future.