The following article was written by Michelle Shaman and the full article appears at -Secret Investment
“Land banking can be smart, simple, and secure. If you adhere to the very definition of land banking, as the strategy of acquiring pre-developed land in the growth path of a major metropolitan area and holding (or banking it) to sell for significant profit in the future, your risk can be very low and your potential for return, as seen historically, can be very high.
It is usually a good idea to purchase land with cash, HSA, educational, or self-directed IRA funds. Borrowing money to purchase land is not land banking, it then becomes “land speculating.” The key words to yielding high returns are “acquiring pre-developed land.” Pre-developed land is:
- In an area that has already been targeted for growth.
- Located in the growth path of a major metro area.
- In an area with a diversified economy.
- In a close proximity to jobs and affordable housing.
There are 10 key indicators that usually determine the best hot spots for land banking:
- Land is usable and relatively level.
- There are abundant resources in the area.
- The area is easy to reach by car, train, or plane.
- Utilities are in place to accommodate rapid growth.
- Close to an ever-expanding major metropolitan area.
- Current industries and commercial base is growing.
- Existing residential development and low cost housing.
- Higher education institutions nearby and more planned.
- Regional studies projecting healthy population growth.
- Master plan for streets, roads, sewer, electric, and gas.
Land banking, as a long-term appreciation strategy, is for individuals that have both a sufficient income to sustain their current lifestyle and can wait at least five, or preferably 10 years, to reap the benefits of their investment. This can make land banking ideal for planning your retirement, saving for a college education, or building a legacy.
We have all heard the saying: “Most millionaires in America made their fortune in real estate.” That is a partially correct statement; the truth is that many multi-millionaires actually made it by land banking. Land banking has been used effectively for hundreds of years to protect and build family wealth.”
