Land Vs Flat - What Should Be Your Second Home Investment?

Buying a second home for investment purpose is not only common but appears to be the next logical step for first-home owners. Everyone wants to settle their debt on the first home and move ahead to buy another that can become a dependable income stream. However, such investors seem to be divided when it comes to choosing an apartment vs land as a preferred investment alternative. 

Where land gives ample freedom to the investor to utilise it in numerous ways, restrictions apply in a case of an apartment or flat for its limited use. At the same time, a flat is seen as more secured than a vacant land that is exposed to litigations. 

In an effort to understand the appropriate mode for second-time buyers, we will try to look at the advantages and disadvantages of investing in land vs flat here.

Areas of concern	Land	Flat
Investment Cost	Dependent on proximity of land to main areas, particularly those under development	Varies from locality to locality. Price can be high for gated communities than standalone flats
Recurring Cost	Indirect cost involved in protecting land from illegal encroachment or litigation	Maintenance or society cost is applicable and increases with passing years
Financing	Banks do not offer loan to buy land	Loans are readily available for flats/apartments
Return	Non-disputed land easily appreciates in value	Flat/apartments witness slow growth after certain number of years for their limited life span. Other factors like water availability and road connectivity plays important role in determining value
Source of Income	Rental income is low but myriad of options are available to utilise land	Rental income is high for a ready-to-occupy flat. Flat owners do not have many options to use their investment other than giving it on rent.
Risk	Highly risky as it is exposed to illegal encroachment or litigation	Less risky due to operation of modern laws. However, quality of construction and delay in possession can entail risk
Liquidity	Land is highly liquid due to excessive demand	Flats tend to lose value over a period of time and are not as liquid as land

When Is Land A Better Option?

Buying land makes sense if it is meant to be used for building a self-occupied home or for personal use. If not for personal consumption then a piece of land can also be used for commercial purposes, however, location of land is yet again an important factor to this end. 

When Is Flat/Apartment A Better Alternative?

If the purpose of an investment is solely to hold and resell then flats outweigh land as an investment due to demand for residential properties. Further, depreciation on construction value is minimal during early years post-construction. Over and above this, a flat is a convenient investment option for those who do not have time to look after their property or want regular income stream. 

About The Author: Reenika Avasthi is associated with Inverika Investment Solutions LLP as a Content Writer and Financial Planner. She is a Certified Financial Planner and a freelance content writer in the field of personal finance. Her interest in writing and spreading investor awareness motivated her to start blogging.

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