Sure, you know about real estate investing. Flipping houses? Check. Cash flow properties? Double check. And you don’t like to brag, but you may or may not be able to recite the HGTV schedule of home renovation programs in your sleep. But did you know there’s a side to real estate that you won’t see on any home improvement show? It doesn’t even involve houses.
It’s called land banking and it just might be your ticket to riches.
What is land banking?
We’re glad you asked. In the simplest of terms, land banking is buying land in the path of development. Buying land as an investment is not a new idea. No doubt you’ve already heard the success stories of wealthy investors such as Leland Stanford, Warren Buffett, and John Rockefeller. However, what if you don’t have a stray million dollars in your pocket to invest in the long-term game of land investing? Is it a wise choice – or even a possibility – to get in on this game as a middle-income investor?
Who can be a land banker?
Anyone. Yes indeed, you heard that right. Certainly, there are always going to be the big-name success stories such as Donald Trump and Bob Hope. However, if you are a middle-income investor looking to escape the pervasive volatility of the stock market – or just to gain an edge on all of the other real estate investors out there – land banking could well be the “in” you’ve been looking for. Business owners looking ahead to retirement, college students, and families looking to fund college students–along with many others–have all successfully staked their claims as land bankers.
Which is all wonderful, of course, but the question remains: How much work are you really going to be getting yourself into here?
A: Not much work. (Or at least, not as much as you think.)
Actually, holding onto a piece of land without a house on it is a lot less complicated than the opposite scenario. Practically speaking, “upkeep” costs on a plot of dirt are going to be a mite bit lower than they’d be on a twelve-room mega-mansion. Moreover, the process of buying land is actually quite simple compared to working with developed real estate.
But that doesn’t mean you get to skip all your due diligence, either. To start, make sure that investing in a long-term, non-liquid asset is a good idea for your financial situation. Next, do your research to ensure that the company you’re thinking about investing through is reputable. You’ll also want to check that the property you’re buying doesn’t have any conflict of interest attached to it, and that it is located squarely in the path of growth so that you’ll get the biggest bang for your buck. In general, try to steer clear of cheap deals on the internet or “for sale by owner” properties. Sometimes, they end up coming with hidden baggage, and you don’t want to get stuck with a lemon that you won’t be able to sell in the future. Just don’t let inexperience scare you away from a good investment. Tackle the learning curve by getting advice from someone who knows the ropes. Before you know it, you’ll be flying solo … with or without HGTV.