In an upcoming Michael Yardneys conference it appears he is going to discuss land banking. Since i cannot make it to the conference …………………… does anyone have constructive thoughts on land banking?
One thought… how does one afford it unless its part of a large CF+ portfolio.. I mean, the holding costs while you wait for the demand to raise the land value… it would be ok if you could pay cash I guess.
One thought… how does one afford itI suppose it all comes down to your definition of “landbanking”.
Our technique could best be described as “+CF Landbanking”.
If you want 100% of the value tied up in the land…..that’ll send you quickly out the back door…..generally speaking. It may work for some, but cannot be sustained forever.
We instead, keep the land value down to about 85 to 90%, and that has the dual effect of having most of the money tied up in the land, but allows the rent from the infrastructure to pay off the 100% loan….sort of a win/win when it comes to both growth and yield.
Yes I think it comes down to your definition.
I have friends who own small farms on the outskirts of Geelong and Werribee . They are very business minded and run these holdings at reasonable profits where all the while the urban sprall continues getting closer every decade . Some of them bought decades ago and they’re laughing now .
There’s no more land getting made but lots more people . What do you think is going to happen ? [wink2]
.I am paying off block of land. In its first year value has risen by about 12% . I figure that since the interest rate I pay on it is about 6.7% I am about 5 % growth ahead. Unfortunately I started by owing 100% on it but I guess you gotta start somewhere. As long as it keeps growning 12% per annum I am ahead.[biggrin]
Could using an option be considered a form of land banking? I would have thought so. According to some books I have read It is a popular tool when the market looks like trending up.
Land banking short term in a high growth area can be very lucrative. Back in August last year I put down $1,000 each on 2 blocks of land on the Anchorage in Rockingham and only settled about 2 weeks ago. Already the value of each block has increased by approx $45,000 so to this point holding costs have been pretty much nothing and if I chose to exit now I would already be streets ahead.
Just looking for the next Anchorage now thats the tricky part!
Sparky
Land banking is a concept used by the big property developers when they buy up large tracts of “raw” undeveloped land for their future stock.
They add value, sometimes a huge amount of value, by rezoning or developing and subdividing.
It’s a great concept in a rising market but can break the biggest of developers. In the 90’s it sent Hooker Corporation broke and almost bankrupted AV Jenning.
So that type of land banking is not what I am suggesting to the average investor. It would be foolhardy.
But there is an adaption of this technique that I have been using for over 15 years that has worked well and it is the right time of the property cycle to do it all over again.
That’s what I will be talking about.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 11,000 readers each month.
FREE subscription http://www.PropertyUpdate.com.auCyclist,
Not suggesting it is a bad thing but you should be aware that there was a lot of landbanking scams in the UK recently. One of the scammers was rumoured to be starting up in Oz.
google it in UK have a look at least you will know what not to do with landbanking
Originally posted by bardon:Cyclist,
Not suggesting it is a bad thing but you should be aware that there was a lot of landbanking scams in the UK recently. One of the scammers was rumoured to be starting up in Oz.
google it in UK have a look at least you will know what not to do with landbanking
You’re right Cyclist and a good point to make.
They were taking unsuspecting investors and getting them to
investin land that would never be developed in a million years.Apart from being a sham – they were speculating. That’s not something I would recommend.
If you read my book How to Grow a Multi Million Dollar Property Portfolio – in your spare time http://www.PropertyUpdate.com.au/pages/book you will realise that I am not not a speculator looking for the latest fad or the next hot suburb.
Speculation, by definition, has a high degree of chance.
I am in investor. To some that’s boring, but it’s safe and stood the test of time for me.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 11,000 readers each month.
FREE subscription http://www.PropertyUpdate.com.auLandbanking, on a large scale, can be incredibly profitable if you know what you are doing, eg buying rural land that you have a pretty good idea can be rezoned into a residential zone down the track. In my town planning business I have seen many people make very large amounts of money out of this tactic, but I have also seen people push themselves to the wall.
Basically it is a risky tactic if you don’t know what you are doing and/or you don’t have the resources to fund the holding costs. If you do know what you are doing it can be spectacularly successful.
On a smaller scale eg buying a property with a house that you can rent while you get a permit to develop into a small number of units, is less risky and quite a sound strategy for a smaller investor.
Regards
Alistair PerryThis link will take you to the UK scammer that has been targeting Ozzies.
This is how NOT to get involved in land banking. I reckon the best advice right now is to listen to what Mr Yardney says.
Cheers
Leo
You must be logged in to reply to this topic. If you don't have an account, you can register here.
