LAND BANKING SYSYTEM.
Banking can be defined as the business activity of accepting and safe guarding money owned by individuals and the lending it out in order to make profits or simply cover operating expenses.
Land banking is a buy and hold technique, where investors instead of tying their money down, invest in landed properties when it is under developed and sell at a higher rate when the area is fully developed with the aim of making profit. Land is a resource with a supply that is consistently reducing as they do not produce them and a demand that is consistently on the rise.
Investors locate some of these areas they invest in by tracking locations which are best for investment based on the social infrastructure and demographic factors. Investors buy lands, wait for the land’s value to appreciate then sell the same land to other interested buyers for a substantial amount.
Land banking is some thing that major developers and retailers have been doing for decades because it happens in every major city. It has become a way to expand an existing investment portfolio. Most developers purchase lands on the outskirt of a major city and then wait for the population to grow to them. When this happens, the price of land increases in value and they are able to cash in on their land investment.
The trick to land banking is to find areas that are in the path of growth, these areas are common in every metropolitan area and they are often overlooked by most real estate investors. For example, most people want to invest in lekki penisula compared to ibeju-lekki or Epe but these areas that are being overlook are future gold mines as the development gradually getting to these areas are one of a kind in the whole of Nigeria. So if any investor misses out now they may have to buy from people reselling at a higher price in future, in real estate the future could be next year as the value of land keeps increasing rapidly.
In Nigeria, land banking has been in existence for a very long time. Those who know about it have made a fortune from it. There are so many real esate companies in Nigeria that buy underdeveloped lands, farms and other sites after proper research has been carried out on the rate of appreciation in their area of choice. While regular banking investments offer low-interest rates, land banking investment has created an opportunity for you to earn as much as 35% returns on your investment within a year.
The appropriate time to sell in land banking is when the land is at the developing stage. The major spot for investment right now that is still in its developing stage that is also developing quickly right now is Ibeju-Lekki. The aim of land banking is that the spread between the eventual sales price and the acquisition price plus the holding cost would deliver acceptable financial returns.
Land banking involves waiting for a couple of years for the value of the land to appreciate, if you are not patient enough, it is advisable to purchase a well-positioned land, apply some additional amentities that will increase its value e.g installing water, electricity and road access which would instantly increase the value of the asset, so it is ready to sell or lease out. This is a strategy commonly used by property developers.
Another way to reap your gains faster from land banking is by subdividing the land itsef, the total value of the land can be increased by separating the land into smaller portions/plots and reselling them individually. It is easier to find various small-mid range investors than one large scale investor.
As an individual/private investor, you need to find somewhere in the early stages of development, a place where you can still purchase land at today’s rock bottom prices before the wider world perceives its’s potential future value. Before you begin your land banking investment journey it is necessary to have a legal advisor and a financial advisor because of the unlimited likely challenges to be faced in such investmement though it’s a low risk type of investment.
Here at SED PROPERTIES LIMITED, we have several lands that clients like you can use for land banking in Lagos, all our lands are located at Ibeju-Lekki and Epe. Log on to our website at www.sedproperties.ng for further enquiries.