The Land is the Real Asset, Not The Structure

When it comes to real estate, the true asset is not the structure you build but the land beneath it. 

No matter the cost of construction or the grandeur of the house, buildings inherently depreciate over time. Materials wear out, designs become outdated, and the market's tastes change. However, the value of land—particularly well-located land—tends to appreciate. While homes may lose value or remain stagnant, land continues to rise in worth, often yielding returns far greater than the structures on it.

This brings me to an important point: constructing an extravagant house in a neighborhood where the land itself holds little value is an inefficient use of resources. Even if the home boosts the property's valuation, that increase will likely be modest in a market where the surrounding land is underdeveloped or undervalued.

In real estate, it’s crucial to focus on acquiring land in locations where developers are investing or where affluent investors are purchasing. These areas are poised for growth, and as the neighborhood develops, the value of your land—and, consequently, your investment—will significantly increase.

Consider McDonald’s as an example. On the surface, one might view the company as a fast-food restaurant chain. However, at its core, McDonald's is deeply entrenched in the real estate business. The company purchases or leases land, builds on it, and then leases the property to franchisees. These franchisees not only pay rent but also share a portion of their profits with McDonald’s. The company’s success hinges on the strategic acquisition of valuable land, which ultimately drives the brand's profitability.

Another compelling example is the record-breaking land sale in Hong Kong. In 2017, a plot of land at 2 Murray Road, located in Hong Kong’s prestigious Central Business District, was sold for a staggering $3 billion. This deal, at approximately $1,042,978 per square meter, set a new benchmark in real estate. The buyer, Henderson Land Development, used the land to build its headquarters—illustrating just how valuable prime land can be. It’s not the building, but the land, that holds the true long-term worth.

If you're unable to invest in a home just yet, focus on acquiring land. Purchase strategically in areas with growth potential, and make sure you work with reputable companies that provide valid title documents. Hold onto the land, and over time, its value will appreciate—likely far beyond the immediate returns a house might offer.

Wishing you success on your investment journey.