WHAT IS LAND BANKING?
EVERYTHING YOU NEED TO KNOW
Your knowledge of Land banking and how it works is directly tied to wealth creation and financial freedom for you. Land banking provides a stable environment for your cash and a guaranteed path to watching your equity mature or grow.
You might have heard of Land banking. You might even have been on it as an investor.
If you are looking at what it entails and how you can profit from it, then it helps to understand what land banking is.
Land banking is a system of acquiring land in underdeveloped or developing locations for investment purposes and keeping it for use in the future
Importance Of Land Banking
Choosing a location for land banking is one of the biggest challenges you can surmount and at the same time, it is the biggest indicator of success.
Land banking aims to create a financially secure environment that serves as a hedge against inflation and an investment vehicle for long-term investment. Land banking also serves as a tangible asset that can either be liquidated for cashed, leased out for cash flow, used for joint ventures, or a real asset passed on to the next generation. Investment advisors from reliable companies play important roles in helping you with a healthy real estate portfolio.
Today there are lots of players in the real estate industry than in the past, influencing how properties are viewed and presented to the market. The influx of real estate merchants has motivated individuals to be more knowledgeable about the market.
Now more than ever as a property investor going into the market you should narrow your interest down to what land is being sold, the location, how it’s being sold, who is selling it, and what the future looks like for that land in terms of equity appreciation.
Investment Analysis For Land Banking. What To Look Out For
Understanding the use of fundamental and technical analysis when investing in land banking for the long term gives you two valuable investment strategies you can use for making profitable investment decisions.
As an investor looking out to evaluate an investment decision you should start with a fundamental analysis of the land, location, and the market in general. The fundamental analysis measures the intrinsic value by evaluating every aspect including the company you are buying from, the title, and documentation.
The fundamental analysis compares the value assigned to land compared to the current price. Investors use this comparison to determine whether a long-term investment in a particular land for land banking is worth it.
Technical analysis aims to provide insight into the future activity of the environment where the land is located. Investors using technical analysis feel strongly that the future value in terms of equity or capital appreciation can be determined by reviewing economic patterns based on past and current activities.
Reliable real estate companies can provide you with both analyses about land banking opportunities that can help you with the right decisions before investing.
What Are Positive Land Banking Investments?
Higher equity returns after a year or a couple of years are always an indicator of positive land banking investments which is also beneficial in acting as a hedge against currency inflation.
Positive land banking investments include a valuable and consistent quality of what the real estate companies are offering.
Benefits Of Land Banking Investments
Land banking investment can result in an array of benefits for you, including more cash flow, capital to reinvest etc To narrow it down, here are several benefits that land banking can provide for you.
Investors that do their due diligence correctly are very much more likely to see higher returns on investment. In fact, studies show that 50% of land banking investors earn over 300% return on their investments due to economic activities in the surrounding area improving the perceived value of the property, and increasing the price of the land.
This investment has very minimal to no maintenance. There’s almost nothing you have to do after you have acquired a property for land banking.
Requires fewer finances
Furthermore, you don’t need much financing as you can co-invest, to begin with, and build your way up. Lands in developing or undeveloped areas are relatively cheap and affordable.
Checklist For A Successful Land Banking
Since Land banking considers committing your finances for future gain, there are some factors that can influence the success of your investment. When investing in land banking, you need to take an investor’s point-of-view approach. To do that, here are several factors that you investor should consider when pursuing profitable land banking investments.
- Determine your investment objective
- Investigate before you invest
- Do technical and fundamental analysis
1. Determine your investing objective
Are you investing for the short term or long term? Are you investing for retirement, cash flow or capital gain? Land banking is an excellent investment choice for the long term unless you are forced to sell it due to some emergency.
2. Investigate before you invest
Be skeptical. Do your due diligence and investigate before you invest. Research the company you are buying from properly. For how long have they been in the real estate space and what’s their growth strategy? What is their track record? What are people saying about them?
3. Do a technical and fundamental analysis.
Technical and fundamental analysis helps as a guide before making a decision to invest, they show you what might happen in the short term or long term.
The future value of a land-banked property can be forecasted by looking at the intrinsic value of the property and the economic activity of the surrounding environment.
Success starts with information by actively asking the right questions, listening to the information you receive from reputable investment advisers, and removing points of discordance that cause dissatisfaction. Do that, and your land banking investment decision will cause your equity to grow exponentially.