Land. It’s a tangible asset that many people agree offers some security against inflation and times of recession. Historically, even when the real estate market slowed down, land was still a pretty good option, because if one had the cash to purchase, they could pick up good deals and wait until development resumed. The cycle would continue and growth would always happen; it’s just the pace that would fluctuate.
One challenge to becoming a landowner is usually lack of cash. There is the option of mortgaging the property, but then qualifying can be an obstacle, particularly if one is already moderately to heavily leveraged. What then? Other questions to be considered include: where is the best place to invest? How long will I need to hold onto the investment? How much appreciation can I expect? What will the taxes be?
Last night, my husband and I were sharing with our friends about something called Land Banking. If you Google it, you’ll get various but similar answers and opinions. But as I’ve learned, not all Land Banking is created equal. First and foremost, you will want to make sure that the company you are working with is in a cash-flow scenario and not relying on multiple investors to make the initial purchases. Next, the company needs to have a strong relationship with the city planners, local government, and have thoroughly vetted each property’s history. In many cases there may be clouds on the title, past due liens, and so forth that all have to be cleared in order for the land investment to be offered to the client.
You should ask to see all the comparables, the historic growth, (i.e. what retail exists there already, what private industry is there, what medical and transportation facilities exist, and what does education look like there? Additionally, what does the housing market look like? What is the average hold time for the land investment, what is the tax rate, as well as how will the title be conveyed to you, the new owner?) You should expect to receive title in fee simple as a tenant in common owner. The deed must be recorded in the local county records. And lastly and most importantly, the company offering the Land Banking investments MUST have research-based evidence that the chosen area for investment is exemplary compared to other geographic areas for Land Banking.
When you look around your immediate community, you can easily identify open fields that are now major developments. Industrial, residential and municipal projects are all built on open land that are not otherwise protected lands. Would you have made money owning the dirt below the major metropolitan areas? Of course!!
At MVPL, we have partnered with a company we believe to be superior in their approach to Land Banking, having put years of research into where to achieve the highest returns. At a minimum investment requirement of $40,000, you can own land in the fastest growing area of the country with no down payment, no mortgage, and no cash out of pocket if you have a qualified savings plan. If you are looking to protect your assets and not risk losing more money in the market, Land Banking could be a wonderful choice. You can even hold your land in a Roth IRA and have it grow tax-free!