It’s no secret that real estate is a solid investment. The value of properties appreciates over time, and you can live in the home or lease it until you want to sell or pass it onto your kids. Once you have the funds to invest in a property, it’s just a matter of selecting what type of property you want to invest in. Realtors will usually suggest investing in a house and lot or vacant lot where you can build your own home.
To help you get the best value out of your money, here are the advantages and disadvantages of investing in a house and lot or vacant lot.
House and Lot
A house and lot is a portion of land with an existing home, allowing you to buy two significant investments in one package. Below are the different disadvantages and advantages of investing in a house and lot.
- When you apply for a loan from a lender offering no-cost mortgage loans to cover upfront costs, both house and lot are included in the terms. Unlike in vacant lots, where you need to apply for two separate loans, costing you more.
- It gives you the convenience and enjoyment of ready to move-in homes.
- Developers provide several model houses, allowing you to pick one that caters to your specific needs the best.
- You get to enjoy the convenience of having an assembled team of designers and workers.
- The value appreciation of a house and lot is significantly higher than a lot only, yielding higher returns on your investment.
- The price of a house and lot property is fixed, so you don’t need to spend anything on construction.
- You can spruce up the home’s interior, but most realtors don’t allow you to change the exteriors.
- A house and lot cost more upfront.
- Selling a house and lot in the future can be challenging to market since it tends to be more expensive than vacant lots.
Vacant lots are a parcel of property with no buildings on its surrounding areas, allowing investors to construct any property they’d like on it, depending on its location. Here are the following advantages and disadvantages of investing in a lot only.
- Investing in a lot only gives you the freedom to decide what to build on it, from a small office for commercial use or a housing unit for tenants.
- It gives you the freedom to make your house from scratch, allowing you to create your dream home as long as it adheres to your developers’ and the homeowners’ association rules.
- When you buy a lot in a residential zone, you’re not allowed to lease it for commercial use.
- You’ll have to create your design team, including architects, contractors, and workers from scratch.
- You need to secure all permits and requirements for the construction of the house.
- You’ll have to find a way to connect the home to power or water supplies, and sewage treatment.
- It’s significantly more expensive than investing in a house and lot since the home’s construction forces you to spend over 20% to 30% of your target budget.
At the end of the day, if you’re looking for a more convenient, practical, and profitable investment, a house and lot is the best choice. That’s because, in the long run, they provide you with more flexibility and the right to expand the properties, adding more value to the home, giving you a promising and lucrative return.