How To Invest $5000 For Superior Returns

By Martin Thomson

It is a challenge to invest $5000 because it is really not enough money to buy wealth producing assets like real estate. However many people overlook land as an investment vehicle. Lets explore now, how you would invest $5000 in land and make some really good returns.

First of all, I am an investor with a typically contrarian opinion to the conventional wisdom. This doesn't mean I am a crack pot, but I do recognize that going where there is little competition is better than following the masses.

In real estate, they call out "position, position, position" The meaning of this is vague, but essentially what this catch cry refers to is buying in the best areas of town. It is quite a misconception to my way of thinking, because it sort of points to the false fact, that there are no buyers in other areas of town, just in the best areas. This is simply not true.

It all depends on the utility for the purchase. If you want to invest $5000 and get a return for example by the end of the year of double, or $10,000 you may be on the right track subdividing a block of land. It is called a "paper rehab" Similar to improving a property but without the painting and hard work. Just a few forms to fill in and pay for and voila, instant increase in value.

Your first step is to find an area where you can afford to make a purchase. With $5000 you will need a 10% deposit on the loan and legal costs and of course the costs of a new title when you subdivide this land. So you are looking for a largish block at around $30,000

Next, you find 2 or 3 candidates and begin doing research on those specific blocks. You go to your local town hall and they will have all the information you need to make a choice. You need to first establish, if the block is allowed to be split in two. Corner blocks are great for this, but consider all candidates on their own merit. Typically there will be a certain minimum size new sub divided blocks may be. In my area this size is 400sqm so your block will need to be at least 900 or 1000 sqm because every block has some sort of "no touch zone" to allow council to access utilities etc. Also you must allow for drive ways and such, so the minimum is just a guideline.

Once you are sure the land is able to be split, you can approach council staff directly and get them to give you a tentative answer. Of course they will not be able to tell you for sure, until you actually go through to process and submit the application. But a tentative answer 9 times out of 10 is fairly certain.

You go ahead with the purchase and cut the lawn to get it neat looking and more appealing. You get your sub division papers processed and now you have two smaller blocks worth $20,000 each. Sell them both, pay out your bank loan and you are left with $10,000

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Investing $100 - You Invest Cheap But Smart

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Published at Dec, 30 '07 ; read 431 times;

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