Land Investment Strategies 2
Buy In A Booming Market
Land for sale 2 -- This is the second article in a series on land investment strategies.
No matter what you are buying, its hard to go wrong in a booming market. When you are investing in a market where all the real estate prices are going up quickly you can buy pretty-well any piece of land and you are likely to make money.
Sounds too simple, right? The problem is, what if the market you are living in isn't booming? Well, if this is the strategy you have decided on, get moving and find a booming market! You might have to do some research, some travelling and you may have to make a few long distance phone calls, but you will end up with a great investment.
What's more important? Putting in a little bit of effort and making a lot of money or sitting at home, investing where you live and not making any money?
Now, before you get carried away and start investing randomly in a booming market, you need to know why all the prices are going up. If you invest in the wrong type of booming market, you may make a lot of money but you could also lose your shirt. Be careful.
There are two types of booming markets: One is where the prices are driven by growth in the economy. The other is where the prices are going up because lots of speculators have got in and keep flipping properties, artificially inflating the market value.
Here's how it works...
If there is some industry that is doing real well, like the oil industry, people will move in from all over the world to fill the jobs created. When people come into town they need a place to live, so demand goes up. If it is a booming industry there will be more people moving in than the supply of housing can accommodate so prices will go up.
Another scenario is when some industry moves into a community, like mining, a paper mill, oil refinery, etc., there will be an abundance of jobs created. People will move into town and the prices will go up.
Sometimes an area becomes the hub of a particular type of industry like software development. Other software companies will come in and settle there because there is an abundance of personnel that are available in the area. More companies will attract more employees. Housing prices will go up.
In other cases the government, university or some other dominanit employer in an area does a major overhaul of their processes and they need to hire lots of people. This is another "real" demand and realestate prices will go up quickly if the size of the project is big enough to significantly impact the community.
These are all cases of "real" market forces driving up the price of real estate. However, at some point, the speculators come in, trying to make a quick buck.
If you are in this kind of market, you are probably too late. The reason I use the word probably, is because if you buy some property just as the speculators are coming in, you still have a chance to make some money if you buy and sell quickly, within a year.
However, these "bubbles" don't last long. Within a year or two, in most cases, the speculators have driven the price up so high that the "real" demand can't keep up with the prices. Lots of speculators get caught and lose all their money. You could be one of them.
My advice is to find booming markets in one of the scenarios above, just as the demand is increasing. Buy and hold the land for three to five years and then decide on the best way to exit.
This way you'll make lots of money and you'll avoid the speculative investor trap. In fact, the best time to sell may be just as the speculators are climbing over each other buying and selling quickly to make their "quick buck".
I'll discuss exit strategies in more detail in other articles.
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