5 Steps to Land Banking Success

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.