Buy second land or not

Hi Sonny,

I have heard of others (experienced investors) who buy land when the prices are good, and more than one at a time. The major question really is “Are these land blocks really good deals?” Much of that answer will depend on who is developing them. Although I’m sure there are a host of good, honest business people doing good deals, the whole H&L scenario can also have its share of sharks.

Is your goal to develop that block as an IP? If yes, then what? Will you hold or sell? Is the plan to provide a chunk of cash at the end of it? Or do you plan to keep it as an Income source while (hopefully) having it grow in value?

Keep in mind that “greenfield estates” can be built in areas where there is heaps of land surrounding, and little to entice people to buy there (e.g. Pimpama or Yarrabilba in SEQ). They can be small blocks and any chance of Capital Growth could be a decade away. But then, if in a tightly-held city area (e.g. a farmer sold their farm in suburbia, this development has nowhere to continue once sold out, is in a major city and infrastructure is already in situ…) then the prospects of Capital Growth COULD be huge.

So much depends on just what and where you are looking, and at what price…. Caution is advised UNLESS you know heaps about the future prospects of this area. The fact that you are building a home there means it has at least some good things going for it. ;)

From the finance side, if values were to drop, you might be struggling to settle on your home (the Bank might require you to provide a larger cash deposit). Perhaps for that reason alone, it may be wise to hold back on the second block…. but let’s see what thoughts come from others in reply….

Benny

Sonny wrote:

I am the only one working $80k/yr with 2 kids.

Without knowing the finer details of your situation – this sentence here suggests that borrowing capacity is probably going to be quite tight.

Cheers

Jamie