Many of those seeking to invest in real estate understand that they have three main options: investing in an apartment, investing in land, and investing in an office asset. So which option is preferable? Under what situations one option would be preferable over the others? What are the main differences and what is important to know before closing a deal? We have studied the subject from every angle, and in an attempt to come to a decision, the following considerations were reviewed:
The implications of the costs
As regards the investment amount, investing in agricultural land is usually the most negotiable, especially if it is agricultural land for which the processes for changing its designation have yet to begin. Having said that, regarding investing in land, the overall picture must be carefully scrutinized; that is, the planning stage the land is in and its designation in regional planning. Often it will prove much wiser to invest a few hundred thousand shekels more for land bearing the status of “land in advanced planning stages”, not necessarily because the return will be much higher, but simply because the return will come much quicker, and the investment will be considered less risky in general. It is important to point out that the more advanced the land planning stages are, the greater the land’s value as well as its negotiability.
Land for Investment – main advantages
At present, investing in land constitutes a wise step, simply because the data show that the Israel Land Administration’s policy is to release land. Moreover, in contrast to investing in an asset such as an apartment, there are less accompanying costs that eat into the investment. – less to pay for insurance, for ongoing maintenance and renovation, months when the property is empty, without tenants, for renovations.
The importance of certainty – investing in land as against an apartment
When purchasing an apartment for investment, one knows exactly what one has in one’s hand. Perhaps one does not know exactly how long it will take to find buyers/tenants, how much the return will be, or how much the asset will be worth in five years time, but the rest of the data are precise and known. In contrast, when investing in land, the unknowns are far more significant and extensive. One cannot be sure when building permission will be granted. One cannot be sure if the land indeed will be released in the next decade. One cannot be sure how long it will take before the land will contain an apartment that will be one’s own. It is not possible to know what the return will be and when one will benefit from it. The point is, when investing in land, there is far more uncertainty that extends over a far longer period.
What should be checked before closing a real estate deal
It is important to understand that whether about to invest in an asset such as an apartment for investment or about to invest in an asset such as land in the planning process, it is always important to examine the situation in the most comprehensive way possible. It is important to ascertain how long it will take for the deal to be implemented, what planning stages are critical for the asset’s value to grow, what the transportation options are in the asset’s area, what the nature of the nearby population is, what real estate is located nearby, what the quality of the infrastructure characterizing the area is, if there are educational institutions and green areas nearby. In other words, investing in an apartment might be perceived as more worthwhile than investing in an agricultural asset, but, in practice, investing in land could prove to be far more worthwhile and safer.
Investing in real estate accompanied by a comprehensive inquiry
Hence, if unsure about the subject, it must be made clear that when it comes to investing in real estate, as much information as possible must be gleaned on the subject, with the support of a professional and reliable company. At the same time, various personal data must be considered. It is important to know how much a person is interested in investing, how patient
he is and what type of real estate deal he is most interested in, for example: to purchase and rent out an apartment, to purchase and sell an apartment, or build an apartment building from scratch. Whatever you decide, the best of luck!