5 Steps to Land Banking Success
- Comprehensive Analysis: As stated in earlier posts, the biggest risk in land is what you DON’T see. If legality isn’t present on your parcel, you’re not going to make money on it – bottom line. This obstacle is completely circumvented for you by my company by its taking of the first mover risk. The land is acquired first and held onto before being released into “inventory” for investors. However, before the land is acquired by my company, a 10 key indicator check list must be fulfilled in order for it even to be considered. All must be within a 3 mile radius; and if one is missing, it’s passed upon.
- Unearned Increment: What do you think about making money while you are sleeping, on vacation, reading a book? This is not done in the stock market. When the bell rings, $10 is $10. Urban Land Institute says that if you are within a 3 mile ring of developments, your investment automatically appreciates by 10%. 2 mile ring is 20%, and 3 mile is 30% of unearned increment. Unearned increment is an increase in the value of land or any property without expenditure of any kind on the part of the proprietor, according to Wikipedia.
- ODM (Other Developer’s Money): The mainstream term is, of course, OPM. How cool would it be if the city came and asked you if they could improve your land? Because of an impending nearby development, they need to put in electrical lines, fiber optics, telephone, water, etc. Oh, and since your taxes will increase with these improvements, they want to give you a little extra money to pay for this. YES! Thank you!! This is what we want as land bankers. It’s only a sign of what’s to come.
- Unsolicited Offers: My company receives offers daily on our investors’ land parcels. They come in fishing for uneducated land owners. They tell you your land is cheap and that they would like to take it off your hands. They tell you they want to list it. The question is, “if my land is so cheap, why are trying to buy it?” Each letter you get, you’re making money.
- Arbitrage: This opportunity is the “name your price” opportunity. Land is like your finger prints. No 2 parcels are alike, unlike the stock market. 100 shares of Microsoft are 100 shares of Microsoft - all identicle. Again, at the end of the day, when the bell rings, $10 is $10. There is no central auction market that dictates and controls prices, hence market imperfections. This is why the opportunity of arbitrage is available in land banking.
Land must go through all 5 steps to make money. Like our kids….they (thankfully) don’t grow from newborn to 18 years right away. Is it too long if I told you that you were going to die in 10 years? Same idea. Patient money.
What is Land Banking?
Land banking is the process of acquiring raw land in the path of growth. Historically, some of the largest fortunes have been made in land banking by such well-known names as the Vanderbilts, Rockefellers, and in California, Leland Stanford and Bob Hope.
Ranging from the simple purchase of improved or unimproved lots in a subdivision, to the more complicated accumulation of unimproved acreage to hold for future development or anticipation of rezoning for a more intensive use, land is the real estate developer’s and speculator’s playground.
The goal of the land buyer is to own the right property in the right place to comand the highest possible return on investment. Depending on the individual’s investment strategy, vacant land can provide a viable alternative to the ownership of improved income property. Raw acreage presents the investor with an opportunity to diversify holdings, earn high profits and offset the risks of loss from other investments.
Primarily, the location of land determines its potential future growth in value. For instance, land lying within 3-mile area on either side of a major highway, bordered or connected by 2 neighboring communities or surrounded by major developments has high prospects to increase in value over time.
Similarly, the purchase of raw land at the periphery of a community by an individual who wishes to hold the land for appreciation requires an educated prediction for the direction of growth. The estimation of future growth patterns results in the inherent feature that land banking is a long-term investment.
Leave a legacy to your family
Land appreciates while most other things decrease in value through usage and age. If purchased correctly, it will most likely go up in value from the very beginning. As parents we feel proud to be able to deed assets and properties that will continuously hold value and create wealth for future generations.
You may contact me at 310.619.4826 or tkcabrajano@sbcglobal.net.
Control your investment
The pursuit of long-term goals gives people the emotional staying power (wisdom) to overcome the short-term volatility of growth-oriented investments. Disciplined investors use land as a vehicle for long-term savings and capital appreciation.
There are different options to profit from your land in the future when it is fully “mature” at market readiness:
- sell for cash
- sell for out of pocket down payment; carry back the note to build cash flow
- trade or barter land for other real estate
- 1031 exchange for like real estate investment
- lease (one of my personal favorites and goals to make passive income)
To become one of these disciplined investors, please contact me at 310.619.4826 or tkcabrajano@sbcglobal.net.
Long Term Trend of Real Estate
The real estate long-term trend cycle is always rising due to limited supply, increasing demand, inflation, costs of labor, materials, financing, legal fees, regulations, etc. Throughout the last 10 or so recessions since the 1950’s, one thing remained constant. The value of land in Southern California has consistently increased. I highly recommend reading an article, 2007 The Real State of Real Estate, by Gary Watts, a successful real estate and economic prognosticator of Southern California. He outlines what has happened to the value of real estate since the 1970’s until today.
Scarcity
“Southern California’s Urban Footprint” under current general plans only accomodates 230,000 new homes. That means that only 29% of Southern California’s Association of Governments growth projections for this area could be accommodated through new development of vacant land.
Many areas are now redesigning their general plans to accommodate more density. When the zoning or use of property changes, this results in a windfall profit.
At 500,000 new people per year x 23 years to 2030 = 22 million v. current capacity of 952,000 based on zoning. This is what SCAG calls an overwhelming scenario.
About
I’m so grateful you are visiting my blog. I think you’ll find it intriguing and that it will be valuable to your financial future.
I grew up just outside of Dallas, Texas in a city called Arlington. My parents, Chris and Debbie Burch, as well as my sister, Shannon Cox, have always inspired me to be a positive light to those around me. I grew up as a dancer and enjoying school with particular interest in biology and mathematics. After going to undergraduate school at Southwest Texas State University, I was accepted into a Physical Therapy program in the Netherlands at Fontys Hogeschool Eindhoven where I met my husband, Anthony Abrajano. We married in 1999.
While working as a Pediatric Physical Therapist, I had two children, Cate and Charley. After 10 years in the field of PT while raising my small children and moving to California, I had a paradigm shift. While PT is rewarding and I adore children, I wanted to find a way to invest in my family’s future and feel secure about it. Everyone told me to invest the max in my 401K, and I did. Boy, was that the wrong choice! I lost so much money in my 401K in 2002 by listening to this mainstream advice. Fortunately, I made almost all of it back very slowly over the next couple of years.
Then preparation met opportunity. My friend, Yuko Rodriguez, told me about Southern California Land Banking. Land banking is investing in pre-developed land in the path of growth based on growth factors such as population growth, affordable housing and large diversified job base.
“All a man has to do to get rich in America is find out where people are going, get there first and buy land.” General Douglas McArthur
OK, well obviously that was long ago; and women can also tap into this form of investment. So I became a land banker. I have invested in three parcels of land at this point and plan on becoming an all American Land Baroness!
Surely, you have many questions which I plan to cover in my blog site. Please feel free to contact me at my personal e-mail address if you’re ready to invest or just would like to further explore land banking: tkcabrajano@sbcglobal.net
My Favorite Charities
I worked at Texas Scottish Rite as a pediatric Physical Therapist for 2 1/2 years, mainly on babies with foot demormities. This hospital provides whatever medical care necessary 100% free of charge to children with orthopedic and neurologically related deformities regardless of ability to pay. I would still be working there if I lived in Texas. If you are looking for a fabulous organization to donate to, please click on the crayon.
The Vick House Project is an opportunity to make a good ending to a sad story. For much of this past year, Americans have heard about the tragic tales of mistreatment and abuse to dogs for the purpose of dog fighting. Please click on "Tank" above to visit the Vick house Project.
