Does land appreciate?

Question

Hi everyone,

I was wondering if their is a math for land appreciation? For example, empty lots in my area are selling for 10k. Ive been buying and building houses on the lots but I was wondering if I started accumulating a land bank would the land appreciate at all?

I am currently building houses to sell but I know true wealth is in ownership. I plan to switch from building and selling to building and renting in the next 7 years. Every house I sell I plan to use some money and buy some lots to hold as a land bank and when ive made enough money, I will build rentals with the lots I have accumulated. I was wondering if I bought lots now for 10k would it appreciate much in 7 years?

Theresa Harris · Answer

There is no way to determine appreciation for land or even a home.  It is not predictable or guaranteed.  There is money in building and selling homes, just as there is in renting. They are two different models with different returns.

Unless you plan on doing something with the land, I wouldn't buy it.  Same goes with a home-why buy it and have it sit there doing nothing?

Henry Clark · Answer

I would not buy land just to hold it.

Henry Clark · Answer

If the above is your plan then I would buy by the acre and do a subdivision. The land will immediately increase in value due to your change in usage and the development.  Lookup my name and both Silver Lake and Journeys end.  A subsisting of prooerty could be as simple as taking 4 acres and splitting in two.  Doesn’t have to be to involved. Since you are already building houses this also helps you increase the value of a subdivision by having an immediate buyer, yourself.