What is Land Banking ? – Is Land Banking a Good Investment
Investing is a financial technique that includes placing money into financial plans, businesses, or assets with the hope of profit. Without investing, it is difficult to obtain financial stability and independence.
In today’s world, there are dozens of investment alternatives to pick from, based on your degree of financial understanding, risk aversion, and budget. These investment vehicles range in risk from low-risk to high-risk. Land banking is one of the low-risk investment alternatives with great potential rewards.
What is Land Banking ?
Land banking is one of the oldest real estate investment techniques, in which investors acquire little or large amounts of undeveloped land with the intention of profiting from the resale.
To put it simply, investors look for land in underdeveloped districts and hold onto it until there has been significant population expansion or infrastructural development in the region, at which point they sell it for more money or develop it to satisfy the rising housing demand.
Property developers typically acquire land, split it into smaller parcels, and sell it to investors in a land banking plan. As an investor, you may either acquire a plot of land or purchase a land option. These are referred to as ‘option agreements.’ When the land is approved for development by the local council, the option agreement is normally activated.
The word “land banking” almost accurately describes what it is. Rather than putting money in a savings account (which earns a maximum of 1% interest per year) or the stock market (which has become increasingly volatile in recent years), some entrepreneurs have taken a different approach by purchasing LAND and putting their money in a tangible, fixed asset that cannot be broken, stolen, or destroyed.
Is Land Banking a Good Investment?
Contrary to common belief, land banking schemes often need a relatively cheap initial investment, in contrast to the perception that real estate requires a big initial investment. You may start with a small budget and yet get a nice return on your initial investment.
The leverage that land banking gives an investor and its contribution to a good credit score are two of its major advantages. By utilizing your land as collateral for loans, you may start a business or invest in other investment vehicles. While doing so, you can also rent out the property until its value rises to the point where it can be sold. This is one of the factors that makes land banking a preferred point for young and inexperienced investors to start.