"Land Speculating- An Investment with huge returns but require a lot of care!"

I first read about Land speculators while in the University some years back, and it was eye opening, I cannot remember which book it was, but it was a book on history in my University Library. Let us look at this investment strategy a bit closer.

A land speculator is someone that buys a large amount of land for little money and also with no intention of using it, then sells it for a larger amount of money to many people to make money when the land appreciates.

Every city center today was once a speculated area, the history of land speculation dates back to the 18^th century in America and it caused the American Revolutionary War. Till today land speculations is still a good investment and a lot of people are ripping good returns from it. In 2012 a friend asked me if I was interested in buying one Acre of land for a million Naira, today a plot of land in that area is sells at  0.5 million Naira. Rough estimate brings the total Return on Investment (ROI) as at today is Two million Naira in four years, so the returns on Land Speculation is high and so is the risk. Investment generally follows the tenets of ‘the higher the risk the higher the return, the lower the risk, the lower the returns’.

Before you acquire any land as a speculator, you need to have your forecast right, so as not to burn your fingers as many investors have done, we will look at the benefits and risk factors, but some other key factors needs to be considered such as:

Ø  Accessibility and proximity of the area you are considering for the investment.

Ø  The land topography of the area, is it water logged or a dry land, is it a hilly land, sloppy or flat land etc.

Ø  Ownership musty be verified with the appropriate government, community agencies etc.

Benefits of Land Speculation include:

Ø  You need little or no Management in land investment: Negotiating in land speculation will not cost you much as you will be speaking with farmers, and illiterates with low financial exposures, this brings you to better negotiating position.

Ø  Land Appreciation: Land appreciates real fast, if it’s purchased in a good area, along future development plan.

Ø  Hedging against inflation: Land speculators hedges well against inflation. As inflation rarely affects land.

Ø  Land is generally considered scarce, as its quantity is limited, the more raw lands are developed, it generally becomes more scarce.

Land speculation is considered a high/ medium risk investment, because of the following:

Ø  Raw land is one of the most illiquid investment of all investment; It can take literally years to sell some land parcels, and others truly may not be marketable at any price.

Ø  All land belongs to the government, and the speculated land can be taken over by the government without a recourse to you.

Ø  Land development is subjected to government regulations and the clearance.

Ø  Financing land speculation is difficult, this is because, it is difficult to convince investors on the time line to their return on investment (ROI).