The Plot Thickens: land, investment and development
Category Blog
With residential property prices ever rising - even despite the effects of Covid-19 which may prove temporary in the long run - an option gaining in popularity is to invest in vacant land and build your own home to cost-specific specifications, size and convenience. A competitive and currently difficult market may make vacant land a selection worth considering.
Points to ponder when buying vacant land
Budget: This can prove more difficult to manage than buying a developed home; there are several aspects to consider before signing on that dotted line. Any venture into the property world is an investment for the future, and this certainly applies more emphatically when buying a plot of land. Obviously you want to obtain the best plot possible, but there are a number of pitfalls for the buyer who doesn't stringently undertake research and thorough assessment.
The shape of things: Avoid plots with odd shapes - this will simply impede your plans when it comes to building. Likewise be aware of slopes - even gentle ones because this only adds to the expense of design and building. Corner plots are less popular because of security issues and extra fencing requirements. Walk your plot. Stamp the ground. Never mind hallowed ground, make sure it's not hollow ground.
Is north-facing feasible? When you're evaluating the suitability of a plot of land, consider which way your home will be facing. If you want to enjoy the sunshine, you'll need to build the house so that it faces north. Is your plot choice compatible with this desire?
Low-lying land: This should be a red flag at least. Low-lying land is at risk of flooding. Raising and supporting your house with pylons or retainer walls will only add to the expense of your development, not to mention the extra costs of excavation and loss of usable land area for swimming pools or gardens. Employ the services of a professional geologist and have a land survey done in order to chart any gradients or underlying obstacles that may affect construction.
Zoning laws: Zoning by-laws will dictate what type of development is allowed on your plot. While some areas are strictly residential, others allow bigger buildings such as office blocks. If you want a quiet area make sure you're not moving into a business zone, and that your building plans don't infringe any by-laws.
Assess the resale value: It's pointless buying a good plot in a good area only to find that once you've built your house, you are unable to realise a decent profit. Be careful of the effects of other developments in the area, and that your plans are not out of line with the general standards and appearance of the location.
Research the history of the plot: Make sure your plot is not on the remains of a factory or graveyard. If the former, make sure you find out what was produced there and if there has been any pollution of the land. Also establish with neighbours if there are any underlying aspects that may hinder construction.
The availability of services: If you're buying land in a built up suburb, access to services will probably not be a problem. However, if you are buying in a more isolated area, you need to investigate the development of infrastructure for servicing in the area. Sewage and water and electrical installations are a vital part of your investment and your plans. If these are not soon available, you may have to rethink your ideas - but there are other solutions such as solar panels and septic tanks. It all depends on your future vision.
Finance: While it may be difficult to find land in densely populated areas, banks consider land alone a risky investment. There is no income to be derived from a vacant piece of land, and it's costly to secure and maintain. And both capital and interest can be lost if there is no growth potential. So beware of how the banks may look at your beautiful undeveloped piece of property, even if it is in the middle of a sought-after suburb.
The City Council: The Council has strict regulations regarding vacant land. You can't just let it sit there unattended forever. You are responsible for securing it against intruders and maintaining a clean, neat and healthy environment at all times. Even though you don't live there as yet, you are still required to pay municipal rates, as well as fees for services like garbage collection and sewerage.
Benefits of buying a plot of land instead of an existing home
- Vacant plots are invariably cheaper than a fully built house, and while it may be more difficult to secure finance, a cheaper property price means you'll be able to pay off the bond more quickly, and save on transfer fees and interest.
- Location, location. With any property purchase location is critical in terms of asset growth and buyer desirability when selling. This is as relevant for plots as homes. If you can buy land in an area reflecting fast-growing popularity, the value could increase even before you begin building.
- Home inspections with regard to roof, plumbing, or electrical issues don't apply, so there's no need for a budget to include general repairs, etc.
- When land remains undeveloped, it incurs much lower municipal rates, including that of water and sewerage.
- Building your own home can be a cost-effective investment. You are able to choose your style, size and materials and fittings. With clever space-saving design and eco-fittings, you can create a valuable home that will not have cost you as much as buying a fully-fledged and established house. This should see your investment grow substantially.
- Always consult an experienced estate agent on your plans and dreams. They can advise you on area and opportunities, and where you will enjoy good potential for future growth. Buying vacant land as an investment for future development isn't always the cheapest option or the least problematic, but following the checks and balances carefully will make all the difference, and provide you with a workable, appreciating asset.
Leapfrog Property Group
Leapfrog Property Group offers a fresh and innovative approach to buying, selling, renting and property investments, ensuring the best property deals for clients across South Africa. Our agents are qualified, trained, experienced; our approach bold and spirited, driven by heart, generosity and honesty. It is our mission to advise, eliminate obstacles and save you unnecessary expense. Trust is our watchword. And value our motto. Armed with our combined credentials, we are the bright face of excellence in the South African market.
Find us at: www.leapfrog.co.za
Author: Leapfrog Property Group
