Land Banking is the art of profiting significantly from land. Although many people think that putting all their money in a bank is the safest option, sophisticated investors know that banks are really one of the worst places to keep your money!
What exactly is Land Banking?
Land banking is, in a simplified way, the process of buying and storing land that is in places where there is an opportunity for urban development, and when the time is right, subdivide them into smaller titles and resell them to builders that have the purpose to create industrial, commercial or residential structures to make a significant profit.
Profit is generated from the following factors:
• Changes in zoning where the land is located. Land value normally increases as a result of rezoning, population growth or municipal expansion.
• Increase in demand for lots due to the above item.
How does the Land Banking process work?
Experience is required to withdraw the maximum profit. In addition, depending on the area where the land is located, it is important to have good contacts and to know the system of the jurisdiction you are investing in. For example, you learn that there is a farm for sale close to a metropolitan area. Hence, you research that there are zoning changes in progress due to population growth and the government’s need to create new urban centers outside the capitals. Therefore, you will soon be able to subdivide the farm into lots. After discussions with various entities, you will already be aware that zoning will happen soon, so you are sure it is time to buy the farm.
Now it’s time to prepare documentation for subdividing lots and building permits that can take at least a year.
The subdivision of land is the main mechanism by which communities are developed. Technically, the subdivision describes the legal and physical steps that a developer must take to convert raw land into urbanized land. Subdivision is a vital part of a community’s growth, determining its appearance, the combination of its land uses and its infrastructure, including roads, drainage systems, water, sewage and utilities.
Upon completion of the subdivision, the New Alliance group usually sells the land to a construction company or other end user, for use as a warehouse or shopping center. In any case, the use of artificial intelligence tools mitigates the risk of these developers.
The New Alliance Group invests and manages its own land banking and has opportunities under development in MG and SP.