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Why buying pre-development land works
Term of investment
A shrewd investor may hold their stocks and shares for over 10 years and property may be help longer in order to make a significant profit. However, with development land you could see better returns in just five years.
Land banking is an old concept to land owners and developers who have been buying and holding potentially lucrative plots of land for decades. What has changed recently is that development land with potential is now being sub-divided into smaller sites or plots enabling opportunities for investors.
Depending on how long the investment company has held the land, profits have been realised in two years, however it is more likely to be 5 to 10 years. A shorter term would invariably mean the land purchase price would be more expensive, but one is almost guranteed an outstanding return on investment.
Affordability
Most small private investors simply cannot afford to buy large tracts of land that are on the market. Land banking and the way it involves private investors means that you can purchase a plot of development land for as little as £5000 - £7000, which is withing the reach of most, and many purchase two or three plots at that sort of price. Of course, such an opportunity has eluded most savers until recently.
Scope for Attractive Profit Margins
One of the best attractions about land investment is the scope for profits. Developers and investment companies only buy land that they feel has an excellent chance of being granted permission for future housing or commercial development. This of course involves a great deal of expertise in selecting the right land. The land is then sub divided so you can buy as many plots as you want to, or as you can afford. If the developer has it right and planning permission is granted or the land rezoned, the value of your development land will soar beyond your wildest dreams and you could sell whenever you want to.
The reason land banking works is that all parties benefit - from original land owner, through developer and private investor.
