As previously stated land banking is one of the most overlooked ways of becoming seriously wealthy.
But here’s the thing. Many investors seem to think this is a pointless place to park their money because:
- There’s no immediate return (like rental income)
- It’s just plain boring (well boring is beautiful in the property market..)
- It just sort of sits there….and nothing really happens!
The truth is it’s one of the world’s best investments because it’s hands-off. Think about that for a second…
I get a lot of blank stares when I tell investors that I love investing in things which are boring as you’re less likely to get stung by the glitz and the shiny hotspot chasing.
But they make the most money. They produce the best results: Scarcity, sound fundamentals and they would probably need more than Photoshop to get what we purchase on the front page of a glossy landscape brochure, but they work.
It’s NOT ‘exciting,’ and that’s why most people don’t stay the distance; because they’re looking for daily excitement.
And so they keep changing, jumping and flitting to pre-empt the boredom, chase the ‘variety. And they consistently lose money.
You see, the simplicity and nature of purchasing the right piece of vacant land can seriously outweigh the many problems that can arise from owning any other type of rental property.
Here are 10 things you need to know about investing in land:
1.You don’t need to do anything physical to the land
That’s right. Forget about a light refurb. Forget about extensions or loft conversions. Forget about employing the right team of contractors or any health and safety requirements by the local council.
The only thing you need to know is the land suitable for development?
If the land is large enough so that another builder can successfully develop a property, then most of the work has already been done.
2.Buying Land is a ‘hands-off’ proposition
Investors often don’t have an easy task in letting out their properties. Rent arrears, vandalism, tenants absconding, relentless maintenance or even just increasing overheads – all these things can be stressful and have a big financial impact.
The list goes on with owning multiple residential buildings. With vacant land, you don’t experience any of these issues.
Once you buy it, it sits there, it behaves, and you get zero of the above problems.
3. You can get yourself a great deal
When an owner doesn’t necessarily use the piece of land, there is often less of an emotional connection. In many cases as the land is not producing them any income and as a result will sometimes sell their land for say 70p on the pound, perhaps even better with absentee owners if they are motivated.
If you can find these people, you will be able to buy some great deals.
4. You face virtually no competition
Right now you’re probably facing some seriously stiff competition on every property you’re trying to buy from new investors, owner occupiers or even first time buyers who can move fast…
You’re probably even getting outbid on the opportunities you’re finding?
When buying land, there is less competition. Why? Because the majority of investors are buying what every other investor is buying: houses, flats and commercial property.
Most investors are too scared or they simply don’t know how to make money from land and this can definitely play to your buying advantage.
5. You can call your own shots
When you buy a property, typically most investors will approach a bank who will lend them the majority of the purchase price in a form of a loan.
When you buy land prior planning permission, you can completely avoid dealing with the banks and any sort of mortgage lender because it’s so cheap and hence requires very little start-up capital.
You can even option land deals, gain planning permission and then selling them on to developers or other investors.
6. Buy without viewing
The great aspect of buying land is you can do sometimes without ever seeing it in person. Land doesn’t involve any structures like buildings and property.
Which means the inspection process is quite simple. Of course the necessary searches need to be adhered to ensure the land is not contaminated in any way…
But with the right research and the right tools you can easily purchase land without visiting the site in question. But we would always advise to do a field check on the prospective purchase..
7. Seller Financing Can Increase Your Return
Say the seller finances the deal at 3% and you can find a buyer who pays you 6% at a slightly higher purchase price. Because many banks will not lend on vacant land, you can make this an interesting prospect for any potential buyer and make the difference as your profit, as ‘easy money’ financing on land is quite difficult.
This is a great way to make an additional stream of income which is truly passive but comes with none of the headaches and issues associated with rental properties.
8. It’s not expensive to own and maintain land
Unlike residential properties where you have to service the monthly mortgage payments regardless of whether the property is occupied, keep the tenant happy, ensure all the gas safety checks are up-to-date, find a tenant and all the other fun and games which are required when successful managing and letting out a property, with vacant land, if you want a ‘park-and-forget’ strategy, this could be the exact wealth vehicle that you’re looking for.
9. Hassle-free owning
Can you think of a better long-term combination than land which doesn’t require re-painting after every tenancy, no inventory to fill out, no deposits to protect AND cannot be broken, destroyed (like a property) or stolen*?
Throw of all these benefits into the mix and it’s like a match made in heaven
(*But you may need to watch out for them pesky investors who may want to use the law of adverse possession to legally claim your land, so you may need to keep your eyes open)
10. Scarcity of land resources
How many times have you walked past a vacant piece of land and thought nothing of it?
Well that is what the majority of everyday people do. You see they fail to realise how extremely valuable land is. They forget there are limited quantities available. They fail to realise the potential it can have once planning permission is granted.
Especially if you purchase the land in areas where there is only a finite number of available property and many other investors, fix-upper-owner occupiers or developers want to get their hands on to.
This is truly one of those long term vehicles which can make a lot of sense without too much effort and where the profitability over other asset classes such as stocks, equities, government bonds and precious metals is huge.
If you think you’ve got what it takes and you’re really interested in this land-banking strategy, stick around for the next part, but I can tell you from personal experience that this information absolutely works in any market.
