Land Investment Strategies 3
In The Path Of Growth
This is the third article in a series on land investment strategies.
When your piece of land is in the path of people who want to do some big developments, you will make money.
Can you see the negotiating power you would have in a situation like that? If you are the owner of property others need in order to make their project successful, they will pay dearly to have your land.
The problem is that by the time a big project is announced, the land has already been purchased by the developer. Of course, you can always buy land next to the development, but you have less negotiating power, and thus you have less potential for profit. The people with big money who have the capability of buying you out at a premium already have what they need.
Of course, you will be able to sell to smaller players and make a good profit, but the opportunity for big money has passed you by...
In order to get in early enough to make big money you have to buy the property before the developer does. That implies a long-term buy and hold strategy.
Most developers will start looking for land about two to three years before a project is announced. Of course, they are constantly on the lookout for possible development areas, but they don't get serious about a property until about three years prior to development. Typically the development period takes from two to five years.
People / companies who do "Land Banking" will buy land five to seven years before a development begins. This way they buy land long before it becomes a good candidate for development. Essentially, they buy farmland, if outside the city limits or land that appears to be far from developed districts in the city.
Developers are in the business of developing. They are not in the business of land-banking. When they look for properties they are looking for the easiest one to develop. All they want to do is go in and start doing their thing instead of going through all the politics of the pre-development stages.
Land Bankers will take a raw piece of land and work with local authorities and the community to get all the approvals so developers can have a "ripe" piece of property to work with. It's a win-win situation for both parties.
But... guess who gets the better return on investment?
It's the Land Bankers, of course. They buy land at its cheapest price, before anyone even imagines a development in that specific location. They get involved with local politicians in developing the area structure plan. They lobby and consult with the local community to figure out the "highest and best use" for that land. This takes a lot of work. You have to have a lot of resources to be able to be an effective Land Banker.
Most small investors who don't have several million dollars to put aside for many years can't play this game. However, they can get involved with reputable companies who specialize in Land Banking.
If you would like to get connected with good Land Bankers fill out the form below.
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