Land vs. Rental Apartments

[Khalid Sal]

I am happy I came across BiggerPockets while reading one of the real estate investing books. I am planning to start investing in real estate but I have two directions I could go:

First - Buy cheap lands in the outskirts of city and wait until demand goes up in 10-15 years then sell at higher price for the highest bidder.

Second - Buy affordable apartments (approx. each apartment is 60% of a price of a single land) and rent them out.

I live in a city where population is booming and so are real estate projects with new buildings and districts are being heavily developed, sold and rented. The competition is truly fierce. Over the past 5 years (since pre-Covid) to date, lands prices went up 200-300%. On the other hands, the prices of apartments went up 150-170% and for rent it went up 20-50% depending on the area and amenities nearby. 

My strategy with the second approach is to get a loan and buy an apartment. I can close the loan in less than 5 years with very manageable installments. The idea is with the rent received I can get another loan (again both installments will be very manageable) and buy the second apartment. The rent from the first apartment would close the monthly installment of the second loan (basically one finances the second). By that time in 3 years, I am confident that I can buy another apartment cash and rent it out and also use it as collateral for a loan to buy a fourth apartment. In 3 years I would only have two manageable loans with easy installments. 

I am leaning towards this strategy because it is allowing me to buy more assets and helps me at the same time achieve good passive income in 10 years. I don’t need the rent I will receive from the first 4 apartments as per my math due to good monthly financial management. Ultimately I can also start selling some of these apartments for a higher price in 3-5 years. 

Nonetheless, the land option is also attractive because of the high demand for house building in the city. 

Would love to hear from others here what they think about my idea and if they can identify a potential issue with it or recommend a better strategy.