Purchasing land is one of the greatest investments one can make for several reasons. Not only is land one of a few assets that holds its value and may even appreciate over time, but land is also a great investment for an individual to make because the purchasing individual can use the land and take advantage of its benefits as they own it. Are you a hunter, angler, or looking to host large gatherings or events?
If you answered yes to any portion of the aforementioned question, then purchasing land is the perfect investment for you. However, you may be wondering what is the best way to purchase a plot of land. Should you purchase your land plot with cash, or should you purchase through financing?
Advantages of Paying Cash for a Plot of Land
Paying cash is the simplest and quickest way to close on a plot of land. If you decide to pay cash for a plot of land, you most likely will be rewarded with a list of benefits including the following:
- A quicker and more efficient closing process
- A motivated buyer who swiftly accepts your offer
- Avoidance of appraisers, attorneys, and lawyers who would be associated with financing the land.
- Clean and clear ownership of the land
The number one benefit of paying for a plot of land with cash is the fact that cash almost always results in a quicker and more efficient closing process than financing would on the same plot of land. If you are able to offer cash for the land, the owner of the land will also most likely be more motivated to sell the land and may even sell the land for below its list price. Finally, paying cash for a plot of land is the cleanest and clearest way to transfer the land from the previous owner to your sole ownership.
With this list of benefits, it may seem that paying cash for a plot of land is the best way to purchase land and in some situations it certainly is. However, before you purchase your plot of land it is also important that you take a look at your financing options and what advantages these options could bring.
Advantages of Financing a Plot of Land
While in some situations, closing on a plot of land with the use of cash will certainly be your best bet. However, financing a plot of land also brings a number of attractive benefits. In general, there are three main benefits to financing a plot of land:
- Keeping your cash will allow you to maintain your liquidity.
- You will be able to conserve your buying power
- Through financing, you will be able to use your cash to improve the land and its features.
Maintain Your Liquidity
Some assets, like stocks and bonds, can be quickly transferred into cash. Other assets, like land, cannot. In general, land and other major investments are the assets that are transferred into a cash value the slowest. Financing your plot of land will allow you to keep your cash and maintain your liquidity- the speed in which your assets can be transferred into cash.
Conserving Your Buying Power
Financing a plot of land is also a great option if you are looking to purchase additional plots of land. Cash is certainly still king, and knowing that you may need to hold onto that cash to quickly and effectively act on other land purchases down the line.
Improvements to Your Land
Financing a plot of land will also allow you to keep your cash for improvements you may need to make on your newly purchased land. Are you looking to develop the land for farming or other purposes? If so, this cash may also be better used to purchase equipment and materials associated with your endeavors.
The Best Option for You
When deciding between purchasing a plot of land with cash or financing it is important to determine which method is the best for you and your particular financial situation. In some instances, purchasing a plot of land quickly with cash may be your best bet. However, if you are looking to further your investment portfolio, improve the land, or conserve your buying power, you may be better suited financing your land!