Land banking is a term that people hear every now and then and tend to ignore. It is one of the oldest form of real estate investment but a lot of people don’t pay attention to it because it’s not sexy at all….How I go just buy land begin wait?
What most people don’t know is that if done correctly, Land Banking has potential to change the trajectory of your generation from poverty to wealth (As billionaire real estate investor, Stephen Akintayo will always say).
In this 2 part article, I will be highlighting the pros and cons of land banking and subsequently, I will be discussing how to go about Land banking the right way. I will close out by giving examples of some notable people that have done this right and built affluence for themselves
Most real estate investors approach real estate by either buying a house and selling it or buying a house to earn rental income. Some people even buy land and build on it right away. These methods are indeed smart ways of investing, but we often neglect the long run that bring about capital appreciation without necessarily putting any value on the land. The wealth is in the bushes and that's true a lot of times, however you can get burnt if you don’t do it well.
Here are the pros and cons of land banking
Pros
Cost little to own especially if you buy in the underdeveloped neighborhoods
No utility payments to be made apart from development fee
No tenants to deal with and so you
No property manager to pay salaries to
Limited supply which guarantees increase in demand by the year
Capital gains on property appreciation of the property
Rental income (where the land is put to use either for farming, warehousing, events etc
Cons
Long waiting time to see gains (if at all there are gains)
Inherent risk of Omoniles claiming such lands
Risk of buying a committed land where the govt has plans to use such lands
Too many Land trading companies looking to cash out without securing the interest of their clients
Lack of perfected title for the very cheap lands.
In the next article, I will be explaining how to go about land banking the right way and notable investors that have made it big in the land banking space. Watch out for the second part of this article by 10am Nigerian time tomorrow.
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