25/07/2023
UNDERSTANDING LAND BANKING.
For a long time, real estate investments have been a thing for those in the top position (the rich), financially adequate, and good in brains with money until the market was modified and more real estate investment opportunities opened up to anyone and everyone — from rich people to those in the middle-class. Because people believe that being a (profitable) property investor should be a far-fetched idea to NO ONE.
There are so many people out there looking for several investment opportunities to invest their money. One of the many investment opportunities in Nigeria with great ROI is the real estate sector because land never depreciates.
This book will enlighten you on the many benefits you gain from investing in Land banking.
WHAT IS LAND BANKING?
If you are coming to the idea of land banking for the first time, you probably have one question: what is it? And closely followed by, “should I invest in it?”
Land banking is a real estate investment scheme that involves buying undeveloped land at a reduced amount with the goal of holding unto it for a while and sell it for profit at a future date when the price appreciates.
Investors acquire land by tracking locations, which are best for investment, based on social infrastructure and demographic factors (Population).
Land investors buy lands, wait for the land’s value to appreciate, and then, sell the same to other interested parties for a substantial profit.
Historically, land banking is one of the oldest real estate investment practices. It allows Investors to buy small or large quantities of undeveloped land, with the intention of profiting from the resale of the land.
The Investor is banking on the hope that the value of the land would appreciate.
"Land banking is oil money, it is the bridge between poverty and riches"
HOW DOES LAND BANKING WORK?
There are many large real estate development companies in Nigeria that engage in land banking. These companies buy undeveloped land, farms, and other greenfield sites after thorough research on locations prone to quick appreciation and development to add to their existing portfolios.
These portfolios can be considered as their “bank”. This practice enables developers to have a ready stock of land for any future property developments.
These land banking investment companies help investors to put their funds into purchasing undeveloped lands from their land banks; investors hold them for a while intending to resell them at higher prices for maximum profit.
HOW MUCH MONEY CAN I MAKE BY INVESTING IN LAND BANKING?
While regular banking investments offer very low-interest rates, land banking investment has created an opportunity for you to earn as much as 60% returns on your investment within a year.
REASONS WHY YOU SHOULD INVEST IN LAND BANKING:
(1) Appreciation of the land’s value: Land banking is a good investment strategy to the extent that the value keeps increasing: this is true globally. The cost of acquiring land, as observed, always goes up and hardly ever comes down.
The land is one of the assets that have the potential to appreciate over a more extended period, so investing in land that has high development potential at the current or lower market value ensures maximum returns to the investor.
(2) Value addition:
You can decide to make improvements on the land which will make it more valuable. Value addition to the site is possible by obtaining property development approvals and then, over time, proceeding with property development.Value addition makes the land more attractive for developers, who may be willing to pay a premium for it. Alternatively, the land banker may opt for financing and continue with property development.
(3) Minimal Start-Up capital:
Untapped, vacant land is generally the cheapest type of real estate to be found. It’s not until expansion and development occur that property begins to increase in value.
Hence, if you know where to look for great deals on land, it requires minimal start-up capital to get your business up and running. It’s a type of investment that doesn’t necessarily require you to have millions of naira.
(4) Land is cheaper to own as a long term investment: The land is relatively abundant and thus cheap in some developing parts of the country, like Ibeju Lekki & Epe (Lagos State), Akute (Ogun State), and Mpape (Abuja). As an intelligent investor, buying this vacant land offers you a more accessible and more affordable way into the real estate market.
When you buy a piece of land for the right price, Land banking can be the type of investment you use to keep your money stored somewhere for a while.
Your asset sits quietly in the background, costing you almost nothing and silently increasing in value.
(5) Generate Remarkable Income Before You Sell: Land can generate income while waiting for future economic development.
A great example is leasing it out.
Land in a rural farming area can give the land investor an exciting income stream when the investor charges land rent for the farmland, which will be used for agricultural purposes by the renter (if it’s fertile land).
You may also be able to harvest the trees through logging on your vacant land with woodlands.
(6) Lower competition: There’s low competition in this real estate investment niche. Most people (especially those with a lot of investment capital) are focused on the shiny and glamorous aspects of real estate investment—condo buildings, developments, house flipping, and multi-units. It’s not their fault; almost everyone is focused there.
If looking to buy undeveloped land, then a significant advantage is the smaller competition you will face.
You can find the land that meets your criteria in no time, and you can still negotiate to get a better deal time.
(7) Subdivide For Land Sales:
Another way investors can make money off their land banking investment is by subdividing their lands for sales. Investors can increase the total land value of their investment by separating it into smaller lots and selling them individually to buyers.
In many cases, the subdivided land can be more valuable than the whole. This is due to marketability and the fact it might be easier to find a buyer for a smaller, more affordable parcel of land, as opposed to one large lot.
(8) It is a finite asset:
One of the biggest reasons you should invest in land is that it is a finite resource. New residential high-rises will continue to be built, but only a limited amount of land is available for ownership.
Because of this, owners can be sure that their investment will constantly be in demand as a result of which, its price will continue to appreciate. Investing in a plot of land is undoubtedly one of the best options for individuals looking to gain high returns with minimal risk.
WHY LAND BANKING IS A TOP NOTCH INVESTMENT:
"Land banking is like an allocation of an oil well"!
Land is a safe investment that will always be in demand for one reason or another.
The land is very inexpensive to own as a long-term investment; the investment could be made according to your financial capacity.
You can increase your returns quickly.
This type of investment has a low tax rate; if your investment property is sold after a year, the gain is subject to capital gains tax rates.
Real estate coincides with retirement; when real estate is purchased, the cash flow is lower, but over time, it yields a higher income, which is a perfect investment for retirement.
There will always be value in your land. Other investments can leave you with little to no tangible asset value, such as a stock that can dip to zero or a new car that decreases in value over time.
Research has shown that land banking investment is without question one of the most wealth accumulating investment schemes to go into.
It comes with a guarantee of great profit returns in the scope of five years. This is assured because it has proven to be one of the most profitable short- or long-term businesses. Land always appreciates and is relatively cheap to acquire in Nigeria. Abuja is one of the best places to land banks in the country. Simply buy some plots near a soon-to-be-developed district, wait, and bank (profit).
"Do not look at the property's price, look at the potential for income, growth of the area, and then look at the price"
_Kim Kiyosaki_
