21 Sep Learning the Ropes of Land Banking and Finding the Best Commercial Property Loan to Suit
Tired of making investments that yield little to no return? Perhaps it’s time to consider land. Assumed to have an unlimited useful life, land does not depreciate, which is why it can be an excellent investment option. In fact, generally it appreciates even further as the area around it develops.
There are many ways you can generate profit from a parcel of land. You can develop it by building residential or commercial structures for sale or lease. The development itself can attract other forms of investment, which can be tapped for future profits. If the thought of engaging in the actual development of land doesn’t sit well with you, land banking might be an option worth considering.
What is land banking?
Land banking is the practice of buying land and holding it for sale or future development. This often involves properties that have high appreciation potential, usually at the outskirts of cities and metropolitan areas. As the value of the land appreciates, the land owner may decide to sell it or develop it themselves. Their decision will depend entirely on the potential profit the property could generate in relation to its appreciation and, of course, on the local council’s approval for the land’s development.
Land owners may sell the land to a single large investor/developer or sub-divide it into parcels which can then be on-sold to smaller investors or purchasers. If you are an investor, this could be a great opportunity for you. With a considered investment strategy, engaging in land banking can be a stepping stone to even bigger and more profitable ventures.
Benefits of Land Banking
Many investors are attracted to land banking because it is downright a hands-off proposition. They can completely avoid the cost of developing and maintaining the property and still potentially make money out of it. Because the properties involved in this kind of strategy are distant from the city centre, they often don’t attract Mum and Dad buyers, helping to keep competition in check. With demand at almost zero, you can expect the price of the land to be a lot lower than those of the properties near the city.
How to Engage in Land Banking Strategies
Like all investment structures, land banking comes with its own risks. Your success as an investor depends on your risk appetite, your understanding of the area you have purchased in, and how your purchase fits in with your long term investment strategy. Be thorough in your due diligence and ensure you have spoken with your own Accountant and Solicitor to fully explore the opportunity.
Once you’ve done the necessary research and are satisfied with your land banking opportunity – contact us! IBN Direct sources land development and commercial property loans specific for land banking strategies and can help you obtain the funding that you need in no time.