Land investment growth can and should be tracked with professional guidance.
Alternative investments such as land can yield better-than-the-market returns. Investors can also track the investment’s progress over time.
Investing during the worldwide recession has been a difficult road for individuals most accustomed to trading in stocks and bonds. Returns have been disappointing since 2008, and the Eurozone crisis portends very little good news for traditional investments in the near term.
Investors instead have turned to alternative assets, the growth from which has been considerably better in recent years. These assets include hedge funds, exchange funds, private equity and rarities (coins, art, jewelry, antiques and antique autos). One alternative asset that is particularly attractive is raw land. Unlike developed property – where market value is well established, value growth may be minimal and buildings need to be maintained over several years – undeveloped land can grow in value under well-managed circumstances and in a relatively short period of time. Those circumstances currently include the housing shortage and growing UK populations, where market forces suggest millions of homes need to be built over the next decade.
Professional land management companies often pool investors into a single property fund that buys land, after which a zoning change is sought with the local land planning authorities. With that change, some infrastructure may be put into place – roads, water and other utilities, for example – and then sold to builders.
A substantial investment is necessary, typically beginning at £10,000 and often several multiples of that amount. Of course, at that level the investor could and should engage themselves throughout the time the land is owned, tracking progress according to a pre-established set of milestones. Not everyone gets rich on land, but following a few crucial tips can help the investor improve his or her odds:
• Hire the best consultants. Buying land that needs to be rezoned is not a hobby for amateurs. Professionals who understand potential future value, as well as the local landscape for land planning authorities and area housing needs, are necessary to make the investment successful.
• Select a land investment that is consistent with yours in timing and returns. Some land will mature to a profitable position in 18 months. Other tracks may take five years and perhaps longer ¬- which may or may not fit your own financial management goals and needs. A professionally managed land investment will be able to project this with some accuracy. You can also expect to be given updates on progress, such as when planning has approved new zoning, whether infrastructure investment is necessary and how well it is progressing. Land is an exciting, tangible investment that shows progress you can sometimes see and touch, if you are so inclined.
• Acquire land with the most promising properties. When you work with professionals, they should select tracts with certain, important characteristics: proximity to high growth, where housing stock is in greatest demand, where the land can be rezoned and where significant improvements (cleanup of contaminants or expensive infrastructure such as bridges) will not be necessary.
Because land is a significant investment, it is smart to first talk to an independent financial advisor in advance. You need to examine where a land investment would factor into your investment portfolio, and how the timing of the investment could affect your tax structure and living or estate needs.