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Land Banking...Anyone doing it? Buy & Hold Approach
03-23-2015, 11:54 AM
I was curious if anyone does "land banking" basically buying up land where you think development will move to, buying low and selling high once hotels, restaurants, airports and highways come through.
This is how many of the bigshots have made their wealth. It's nothing new. That said I can easily see someone uneducated in real estate and land buying getting taken advantage of or overpaying. This is something I'm just starting to look into, was curious if anyone else has done this?
I know recently there was a thread, don't recall the title but someone mentioned doing this in Africa. I have no interest in doing this in Africa but had recently been looking at potentially doing this in the Tulum Mexico area. I think the Riviera Maya area will continue to develope further south just as Playa has turned into a large city in the past 10 or 20 years. I think at some point it may expand allthe way to Belize but in the short term Tulum real estate is already going up from the little research I've done as it develops further.
Here's my issues. One I'm concerned about buying land outside the US, just because it's not something I'm familiar with. Secondly, I'm pretty sure the deals aren't going to be found looking on sites like landwatch and realtor.com. I imagine you have to have some contacts on the ground or better yet be there yourself.
Curious to hear of your guys experiences if anyone has done this? Also what are the risks? I know sometimes someone can build something on your land and basically if you don't say shit within a certain period of time it essentially becomes theirs. Are you responsible if people get injured on your land or dump on your land?
Also, if anyone knows of any reputable places to find decent deals please share.
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Land Banking...Anyone doing it? Buy & Hold Approach
03-23-2015, 02:21 PM
As an investment, owning land is probably a low risk low reward.
As a way to make money?
You're gambling. Not only that, you're gambling against people on zoning boards, with money who are decided where to invest, who know much earlier than you on where plans are being discussed.
Unless you're one of those people.
As long as you understand that. There are a lot of people planning and making decisions long-before the general public knows about coming land developments.
I know Dave Ramsey, who I respect for things like this, says, while land development (value added) or owning real estate can be great investments, owning vacant land is a bad investment.
I would assume if you're in a place to buy vacant land and sit on it, you have decent money to throw around and are more experienced than me at this anyway.
“Until you make the unconscious conscious, it will direct your life and you will call it fate.”
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Land Banking...Anyone doing it? Buy & Hold Approach
03-23-2015, 03:21 PM
That's one of the aspects of real estate investments, albeit what you describe is at best an educated guess unless you are in the know upscale. Almost all politicians can do it for example in the US free of persecution as they can use ALL INSIDER KNOWLEDGE - passed a law on that a few years ago.
I know some investors who made millions out of it - read up on basic literature - it will give you a better idea on how to make money off it.
I found this little book very helpful - it was the basis for the CAIA educational program for a few years:
Real Estate Finance and Investments: Risks and Opportunities, Linneman, Peter. Linneman Associates, 2004.
If you read that you will have a better idea on how to plan any moves in real estate - using insider knowledge is not one of the things you can really plan on.
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Land Banking...Anyone doing it? Buy & Hold Approach
03-23-2015, 04:25 PM
Just picked up a lot in Puerto Escondido Mexico five min. walk to beach $26K US. A new highway going in will cut drive time from Oaxaca City or Mexico City by 5 hours. Planning to either build a small beach house or maybe flip if value goes up. Will be interesting to see how this works out.
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Land Banking...Anyone doing it? Buy & Hold Approach
03-23-2015, 05:27 PM
I like the idea of doing this but the problem is, you're all speculation and you must endure negative cash flow for years, possibly 10s of years, before getting a payout (insurance and taxes are very real expenses).
Where as if you go and purchase a cash flowing investment (think single family home), you not only make cash flow every month but you also see some appreciation on the back end.
I spend a good bit of time in Playa and often have a look at the lots in the area - surely, without a doubt, the area is appreciating at a very fast rate. But as you already said, the people that are going to be really making the most here are the local RE folks in the area that know the area inside and out.
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Land Banking...Anyone doing it? Buy & Hold Approach
03-24-2015, 08:29 AM
Quote:Quote:
This is primarily my line of business. Mexico would be a good place to start and buying from villagers/tribesmen would be the most profitable albeit risky. You need to live in the area you are buying. Know everything inside out (officals, police, brokers, city planners etc.), block money for 3-7 years, and after this you will see huge rewards...
This business pays well, and it definitely keeps you tight for the time you are holding, but when you sell or decide to develop is when you see huge rewards, much greater then many other real estate investments.
I dont think this game works very well in North America/ Western Europe cause people have already made big money in this game, and the appreciation factor is not as a fast as it would be in developing countries buying from locals.
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Land Banking...Anyone doing it? Buy & Hold Approach
03-24-2015, 08:37 AM
Ps you can also learn to farm your land in the meantime if its possible, which can bring in MAD income if you know how to do it. Unfortunately, I have not been able to master that line of business up until now, but its definitely a goal to do so.
In the meantime you need to learn, how to get the right zoning which will make the land valuable, service it (water, electricity, fencing), and also try to get the building permits, so it becomes easier to develop, or to sell in the future.
this is a very TOUGH business and time consuming, but it pays handsome dividends.