Land speculation is another strategy that is relatively attractive for group investments. It involves buying vacant land in undeveloped areas and holding it for a long period anticipating increase in value in future. Selling such real estate when the area has eventually developed can easily multiply or triple your investment.
It is important to understand how land speculation work in order to minimize the risks and maximize the gains that comes with it.
While real estate is generally considered to be less risky, there is no investment that is without a risk. Among the real estate investments options explained, land speculation is one that has high risk potential.
What makes land speculation attractive
Land speculation has a benefit of low capital entry since vacant land in undeveloped areas is the cheapest of all real estate investments.
Land investment has a potential of huge returns on investment when development projects start hitting the area.
The investment does not require active management.
What you should pay attention to
You cannot accurately predict whether and when those developments will show up. Its actually possible that the area will remain undeveloped for ever. That’s why it has a speculation aspect.
Its prone to fraud interns of false ownership identity, double allocations, hyped pricing etc. The amount of research and due diligence you conduct before commitment can go along way to minimize the risks.
It requires patience . Since land speculation not an immediate income generating investment, you can only hope to recoup your investment and make profits after a certain significant amount of time.
For investment groups/ Chama its a bad idea to take a bank loan to finance land speculation if the loan is to be serviced by member contributions.
In most cases some members give up along the way, other times group disintegrate and the burden is left on a few committed members.
The bottom line
Land speculation should not be the primary real estate investment strategy. It should be part of your real estate investments portfolio after all the necessary due diligence to minimize the risk.
