Most real state investors commonly use two real estate investment strategies which are;
– Buying a property to fix and flip it for a profit as soon as possible.
– Buying a rental property to create a dependable source of passive income.
Both strategies are completely legitimate, time-tested methods that have created a lot of wealth for a lot of people in real estate. However, of all the various ways that people pursue real estate investing, one of the most overlooked and underused strategies I know of is a buy-and-hold technique known as “Land Banking”.
Land banking is the process of buying pre-developed parcels of land, holding land for a certain period of time for main purpose value appreciation, selling the land in the future for a significant profit.
In other words, land banking is act of purchasing a particular parcels of land identified for likely metropolitan growth ahead of the expected development with main objective to exchange for higher market value.
Land banking is one of the surest means in real estate business of making huge returns on your investment.
It’s a proven business strategy of purchasing expanse of undeveloped land along the path of growth/development and holding on to it until such a time as it is profitable to sell it to others for more than was initially paid.
Land is seen as an attractive investment as it is a finite resource, historically it has increased significantly in value, it requires little looking after and cannot be lost.
Vacant land gets ignored by most new investors. Unfortunately, this causes most people to overlook a lot of the advantages that land has over traditional real estate investments (e.g. – houses, apartment buildings, commercial properties, etc.).
Unlike most residential and commercial buildings, land costs virtually nothing to own… no utility payments, no tenant problems, no termite infestations, no leaky faucets, no broken toilets, no mortgage payments.
Rather than putting cash into a savings account (where it will earn a maximum of 1% interest every year) or the stock market (which has become increasingly unpredictable in recent years), some entrepreneurs have taken an alternative approach by acquiring LAND and in doing so, they have chosen to park their cash in a tangible, fixed asset – one that cannot be broken, stolen or destroyed.
And think about the economics of land, this is a resource with a supply that is always going down (after all, they aren’t making any more of it) and a demand that is constantly on the rise. Given the value proposition that comes with owning land, I often find myself scratching my head and wondering “Why aren’t more investors involved with this??”
So many people in the world have built wealth through land banking. Example are the likes of Ooni of Ife, Oba Ogunwusi (before he became Ooni of Ife), Folorunsho Alakija, Otunba Wale Akinboboye of Lacampagne Tour and Resort, Chief Emmanuel Oyedele Ashamu, George Washington, Donald Trump, and many more.
Anyone can make extra income with this real estate structure, all you need is the right information to help you make a good investment. Land banking comes with a guarantee of great profit returns in a scope of five years.
This is assured because it has proven to be one of the most profitable business either for a short or long-term.
For any investor going into land banking investment, it is desirable to be conversant with basic highlights like, how to spot a good investment opportunity, when to buy a land, when to sell, when to develop etc. For example, when you buy a land in an undeveloped area, the best time to sell is when the area the land is situated is at a developing stage.
Another thing you should consider when going into an investment in land banking is getting your own legal adviser and financial adviser. This is actually very important when investing in land banking scheme because of the unlimited likely challenges to be faced in such investment.
Who does Land Banking?
– Government agencies use land banking to support long range civic planning or to support future economic development by leveraging land banking, many municipalities gain and hold ownership of land to be used for new roads, schools, parks or as part of economic or residential development efforts.
– Businesses also purchase and hold undeveloped or pre-developed land. A business may purchase land for strategic business decisions or to support long term growth goals. Purchasing land projected to increase in value to the market or to the company is a critical tactical and financial component for many businesses long-term growth strategies.
– Universities and non-profit entities purchase land for future growth or expansion.
– Individuals use land banking as a wealth creation vehicle to build their retirement nest egg, pay for their child’s or grandchild’s education or to create a personal or family legacy.
How it Works
Unimproved land which is not accessible via major transportation grids and/or not zoned for commercial or residential development is worth significantly less than land located next to the interstate and zoned for commercial retail.
Purchased land is banked until there is a substantial increase in value because land value increases as the result of demand, rezoning, population growth or municipal expansion.
As roads are built and zoning is changed, the value of the land grows. Land banking can be used to lock in future profits via supply and demand, based on the more accurately an investor can calculate the path of development and its impact on the value of the land.
Though Land banking is perceived as the underground bank where the rich keep their money with vault breaking returns on maturity, it doesn’t necessarily mean it’s solely for the rich.
In land banking, the poor becomes rich while the rich get richer; it’s a-two way traffic thing.
Land banking is not a new investment strategy and for many investors because of the tangibility of land as an asset it makes sense in terms of investment time frame in their investment goal and portfolio.
Successfully banking the land is the process of strategically purchasing, holding, and selling via research, knowledge and access.
Are you looking for one-on-one help as you start, build and improve your land investing business? For a limited time, we have coaching available.
Whether you need help buying your first landed property or acquiring more, Realtor Baruwa is making room in his schedule to put together a tailored plan to help a select few individuals master the land business.
The program runs for a 10-day duration for each client. Baruwa will help create a game plan that fits your specific needs and unique situation.
By the time you’re done, our aim is for you to have reached success on the individual goals you and Baruwa set together at the beginning of the program.