Land banking and real estate go hand in hand. Being an expert in one requires knowledge and understanding of the other. Here are three interesting things to note about land banking.
What Is Land Banking?
What is land banking? Well, land banking is a way of investing money by purchasing land. It involves purchasing barren pieces of land for money, giving the buyer something tangible to have in place of money that would otherwise sit in a bank account. Buying the land today and holding it for a couple of years almost guarantees that it will increase in value over time. The advantage of this investment is that the land is a fixed asset that has no risk of being damaged, being stolen, or being tarnished by inflation. The land is a physical asset that can grow in value and that can be sold off if necessary.
Places That Started by Land Banking
Newbie investors tend to initially ignore vacant land because it appears to be boring and unpromising. These investors fail to think outside of the box and see the opportunity that open landscapes could hold three, five, and ten years from now. Land banking is usually picked up by experts in the real estate world, who can identify future potential at a glance. Well-known global destinations that sprouted up include Dubai, Tokyo, and Shenzhen.
You Will Have to Flip for Profit
To successfully profit from land banking, you will have to flip your investment once it gains in value. Buying vacant land often means that there is not much going on in the surrounding neighborhoods. However, ten years down the line, as populations grow and move, this land is worth a lot more. It will be closer to city centers and financial hubs. This is when land bankers flip their investments and sell it back to developers for hefty profits. Since the cities are expanding, they have no choice but to pay top dollar for the once seemingly barren land. Timing is key with this kind of land flipping. If you are too early, you will miss large profits; if you are too late, the demand will have died down and you might not find buyers.
Land banking can be an exciting part of real estate investing. Do your research, observe the nearby cities, and make the investment if you believe it is the right timing.