When you have a plot of land ready for development, one of the questions that always goes through someone’s mind is whether to sell your vacant land or build on it? It’s impossible to make a one size fits all statement because each area is different. Market conditions can change, and interest comes and goes.
Despite that, you have to look at your land objectively if you want to succeed. The best way to do so is to look at the advantages and disadvantages of each decision.
Building on the Land
Going for a build means spending resources on materials and labor. You can sell the house to buyers looking for new homes. In another scenario, you can opt to rent out the place and have a source of passive income. However, you’ll need money to do that and may spend more than you’d like to build that property.
The first consideration you have to make on a build is whether or not you have enough money to sustain it. Aside from the house itself, you’ll have to connect it to local utilities and file all the necessary permits. You’ll also have to spend money maintaining the property. It is an expensive ordeal, so make sure that you’re getting more out of it than you’re putting in. If homes aren’t in high demand in the area you’re in, you may want to consider selling the land instead.
Of course, if you decide to build on it, there is potential to sell the property at a much higher price if you make it attractive. Rental properties can also get tax deductions and other benefits, but you’ll have to talk to your accountant about it.
You do lose the flexibility of the property once you decide to build, however. While some are looking for ready-built properties, others are more interested in land. You’ll likely lose some prospects who are only looking for land but attract people who want something built and ready.
Selling the Land
Selling the land can be a quick way to profit. You won’t have to spend extra time and money to build something. You can sell the property right away and move forward with another investment or enjoy the profit. However, it’s not as easy as it sounds.
Because you are selling a blank plot of land, it’s easy for buyers to compare what you have with others. They may compare it with similar land in the area, especially the prices. You’ll have to stay competitive if you want to attract buyers.
It all depends. If there is a high demand for land in the area, most price differences won’t matter because of scarcity. People are also inclined to buy in locations that have constant developments and opportunities.
Strategize Based on What You Have
Before deciding to build or sell, weigh your options and see what comes out on top. You’ll have to assess the costs involved and the potential risk for each. You’ll also want to calculate your expected returns for each based on data in your area.