Is Land Banking Safe… When and where Land Banking Performs Blog

“Landlords grow rich in their sleep.” -John Stuart Mills, Economist and MP

When and where you Land Bank is critical to the performance of your investment. The following illustration displays the advantage of knowing where, in the development cycle, a parcel of land exists:

Historical Performance of Land Banking

Since there is little demand or market activity with undeveloped land, and your returns on developed land are closely tied to the cycles of prosperity and down turns in the local or regional economy, pre-developed land is the choice of experienced Land Bankers. What typically occurs in the Pre-developed or Growth Phase is a series of both planned and unexpected events that causes a parcel of land to spike in value such as public notice of a zoning change, announcement of the construction of a nearby school, church or fire station; or city approval for a new retail or commercial development. Therefore the earlier you purchase a parcel in the Growth Phase the more opportunities you will have to reap the benefits of multiple spikes in value.

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Land Banking as a Retirement Strategy

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” -Franklin D. Roosevelt

A good retirement investment policy is to roll your IRA into real estate. As the stock market heads south, rolling over a portion of your IRA into real estate could vary and lessen your risks. There can be tax profits in converting IRA funds from one kind of asset to another. Also you could roll your capital gains on the land into a future real estate purchase, avoiding the need to pay tax on the capital gains.

If you choose to invest your IRA into real estate, you will be responsible for a speculative investment. If you have selected your land well, you are bound to get quite good gains. Conversely, should the land never get planning permission for development, you could discover yourself sitting on an expensive white elephant. It is important that your due diligence is comprehensive.

Land banking, done the right way, has the potential to return higher-than-average investment gains in the long term. A land banking specialist can provide information about past returns and investment opportunities. However, there are risks involved in shifting from paper assets to land banking, and you should obtain professional advice to ensure that you are fully aware of the risks before making a decision to change your investment strategy.

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Jared R. Foster

Jaredfoster2009@gmail.com