Land can be a great investment, but only if you know what you’re doing. It’s often cheaper to buy land than established homes. The caveat, however, is that lenders consider it a speculative asset.
So, if your plan isn’t to immediately start building, it can be difficult to qualify for finance. Still, the potential rewards that land provides can be worth it.
Benefits Of Investing In land
Investing in land can provide several advantages that can enhance your investment portfolio. Here are a list of benefits:
Historical Appreciation of Land
The monetary value of land has historically seen an increase.
One data shows land investments have provided an average annual return of around 10% over the past few decades.
And while this is positive over time, as a land investor, you need to be able to tolerate higher volatility in land values over time.
Rental Income
Large areas of land for agriculture can be leased to farmers for rental income. There are also cases where land owners lease land to cellular towers, or renewable energy projects.
Diversification Benefits
When you add land to your investment portfolio, you get unique diversification benefits. Real estate moves independently of stocks and bonds. So, it provides a hedge against market volatility.
Requirements For Investment Loans
Investment loans have high risk. So, it’s tough to qualify for one. You have to meet basic lending requirements such as:
Deposit Requirements
Many banks have reduced their maximum LVR on investment loans down to 80%. This means most banks will need you to have a 20% deposit. And if you don’t have a sufficient deposit, you’ll need a guarantor instead.
Genuine Savings
Genuine savings are savings you’ve held or collected in a bank account for three months at least. You’ll need to have at least 5% in genuine savings. However, some may need you to have as much 10% in genuine savings.
Equity
You may need to have equity in another property if you’re borrowing more than 90% LVR.
Good Credit History
Banks prefer borrowers with little to no bad credit records, which means your credit score needs to be above average.
Stable Employment
Banks will want to see that you can afford the investment loans, which means you’ll need to have a strong income with stable employment. If you’re self-employed or a professional investor, you’ll need to show a strong stable income.
Borrowing Power For Vacant Land
If you’re not buying and not developing a vacant land, you may be eligible for:
- 60% LVR for commercial farms.
- 70% LVR for land blocks over 148.3 acres.
- 80% LVR for land blocks up to 148.3 acres.
- 95% LVR for land blocks up to 27.2 acres.
On the other hand, if your plan is to build, you can take out a cost plus construction loan.
You can then borrow up to 80% of the land value and construction cost. We have access to loan products from major banks and lenders. Our specialist mortgage brokers can also help you get approved.
You can call us on 1300 889 743 to speak with one of our credit specialists. You can also fill in our free online application form and one of us will contact you instead.
Factors To Consider Before Investing In Land
Location and Zoning
Land near cities or regional hubs tends to grow in value quicker, and they are easier to finance. Some locations, however, are flagged as high-risk postcodes by banks, which can limit borrowing. Zoning also impacts what you can do with the land (e.g. build a home vs a business).
Size and Shape
Large or oddly shaped blocks can be harder to sell or develop, which makes lenders cautious. Sloped blocks, ravines or uneven land can also drive up construction costs and delay returns.
Infrastructure
Your land should ideally be located in a place with proper infrastructure in place. Access to roads, water, power and sewerage is key. Without it, development becomes expensive, and sometimes impossible. Many lenders also require all-weather road access before approving loans.
Your Finances
Unlike rental properties, raw land usually doesn’t generate income. You’ll need to cover loan repayments, rates, and possibly development costs with no rental offset. Be prepared for holding costs and possible delays in growth or resale.
History of the Land
That cheap block near town might be cheap for a reason. It could be contaminated, flood-prone, or previously used for waste. Always check the history, especially in industrial or commercial zones.
Tip: Speak to a financial advisor before investing. They can help weigh up risks based on your situation.
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LEARN MORECommon Ways to Invest in Land
If you’re wondering, “Is land a good investment for me?”, consider the most popular strategies:
1. Buy and Hold
Purchase land and wait for its value to increase—particularly if nearby infrastructure is planned or rezoning is likely.
2. Entitle and Flip
Buy land in a promising area, go through the rezoning or entitlement process, and sell it to a developer at a premium.
3. Rent It Out
Yes, land can earn income. You can lease it for farming, events, parking or temporary businesses.
4. Develop and Sell
Build on the land and sell the completed property for a profit. Just be aware this strategy involves more capital, time, and risk.
Who Is Land Best Suited For?
Land investments are best for:
- Experienced investors with long-term strategies
- Developers and home builders who can maximise land value
- Cash buyers or those with strong equity positions
For first-time or small investors, land can be risky due to minimal cash flow and longer holding times. In many cases, an established property might be a better place to start.
For example, instead of a $300,000 plot with no income, a similar-priced apartment might offer rental returns and easier financing.
Final Thoughts: Is Land a Good Investment?
It can be. Land is a tangible, finite asset that requires patience and planning.
If you buy smart, in the right area, with good zoning and a long-term view, land can be a strong wealth builder.
But without a clear exit plan or the right financial position, it could just sit there doing nothing.
So, is land a good investment? The answer depends on your goals, your finances, and how well you understand the risks.
If you’re serious about buying land, make sure you talk to the right experts, and only move forward when the numbers stack up.