Buy land, they’re not making it anymore. – Mark Twain
Land Banking can be done with any undeveloped, pre-developed or undervalued land that is the path of development. Land values increase because of specific events such as rezoning or identification for future development of a school, church or residential community. For this reason, the most successful Land Banking is typically accomplished by buying pre-developed land in the growth path of a major metropolitan area; holding it; and then selling it to a developer.
Location, Location, Location
Location is the key to a successful Land Banking strategy. Land Bankers typically do not develop the land themselves; instead, they reap the benefits of increased value as a result of market demand. Demand depends on the desirability of the location. Desirable land is often located close to business areas, growing residential areas, and transportation corridors. Researching local zoning designation, history and trends can provide invaluable information for predicting future growth trends.
The Path of Development
State, county/local governments and agencies designate specific growth paths, so that they can plan for future water, power and transportation needs. As cities expand, more land is needed for residential developments, industry and roadways. The direction of this growth indicates the path of development or growth. Land Banking along these paths typically yields the highest return for investors.
The path of development is dynamic and depends on many factors. Land Banking Specialists can identify desirable land by looking at all the factors. Some of the factors include demographic patterns, migration patterns, housing patterns, government regulation /zoning, economic growth patterns, environmental conditions/pressures, geographic considerations, and public/private investment patterns. Land Bankers understand and even predict these variables through careful research.
A Focused Market
Because of the extensive and ongoing research required for successful Land Banking, many Land Bankers and support professionals focus on one specific market. Markets are identified by growth potential and past performance. Just as real estate agents become experts in a specific areas Land Banking Specialists get to know the particulars of a specific path of development.
Most experienced Land Banking Specialists use the “60 mile limit” rule as a guideline for determining the outer limits of a viable growth path from the center of a major metropolitan area.
It’s Not the Price – It’s the Value
Return on investment is measured by how much your real estate investment increases in value. Land in some geographic markets might be more expensive than land in other areas, but buying cheaper land does not ensure a better investment opportunity. The value of the investment is driven by growth. Growth in some markets is significantly higher because of weather, government funding, demographic patters, and position within the global, national and regional economies. All of these are variables for the Land Banker to consider when buying land.
Full Service Providers
Many individuals do not have the time to become a Land Banking expert. Instead they turn to professionals – like LBI’s Land Banking Specialists – who work for real estate brokers or full service financial providers.