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Buying land; Investment land for sale can be a suitable and stress-free addition to most UK investment portfolios, although it is not yet ’mainstream’, writes Alex Way.

The challenge of building a portfolio of UK investments is one which many people choose not to embrace. Independent Financial Advisors (IFAs) have brought to the masses advice on UK investments, such that investors need only to express their broad requirements (in terms of yield and capital growth), from which an IFA can then construct a suitable portfolio of UK investments.

But IFAs do not, as a rule, possess a unique insight into financial markets from which their clients can financially benefit; rather, they have a deep understanding of the various UK investment products available (and the tax implications thereof), on which they can offer advice and guidance. Nor, in many cases, is the IFAs’ comprehension of the various UK investments exhaustive: for instance, only a minority of IFAs currently provide financial advice on UK investment land, although this is likely to change as buying land for land investment purposes more popular.

For the time being, investors wishing to add UK land to their portfolio may need to take a slightly more ’hands-on’ approach. Before we look at the choices when buying land as a land investment, let us overview the basic types of investors. Though they may not know it, all investors can be subsumed into one of three categories: income, growth, or balanced. Income investors - as the name suggests - strive to achieve a good, stable income (or ’yield’) from their UK investment assets, and are less focused on generating underlying capital growth. Conversely, growth investors are concerned not about a regular (ie monthly or quarterly) income but with achieving high capital growth. Finally, balanced investors prefer a blend of income and capital growth. As a broad guide, younger people tend to be growth investors (since they usually have other sources of income), whereas older people are often income investors, since they may require regular funds in retirement. Within each category, risk should be managed through a diversification of holdings, usually via a mixture of cash, equities and fixed income instruments (ie bonds) and, if appropriate, other ’alternative’ assets.

Investing in land - one such ’alternative’ asset - can in fact suit all three types of investor, depending on the type of investment land in question. An income investor could buy land for sale which is already being put to commercial use in order to achieve a regular yield. When buying land for their UK investment portfolio, the balanced investor would need to decide whether the investment land is being acquired to fulfill the growth or the income requirement. Alternatively, two different types of UK land could be acquired by the balanced investor to achieve both their income and their growth goals.

It is however to the growth investor that land investment is most obviously suited. That is not to say that a growth investor should only buy land for their portfolio: far from it, since the principle of diversification always and everywhere holds true. But the very nature of some types of investment land lends itself extremely well to medium-term and long-term capital growth. This is because investment land in many cases (eg potential development land which is being taken through the UK land planning system) provides no yield but very strong, sometimes spectacular, capital growth potential. This precisely matches the growth investor’s goals (ie zero/minimal income requirement, strong capital growth requirement).

Buying land for your UK investment portfolio - whichever category of investor you fall into - neccesitates that you undertake a fair amount of research yourself, although you can of course call on third party specialists (eg surveyors, land planning consultancies etc) to gain an independent opinion and valuation. For those willing to put in a little time and effort, a judiciously selected UK land investment could be the best performing asset in their portfolio.