Land Creates Millionaires - Land Banking is Buying Land in the Path of Growth
Land Banking is the strategy of buying and holding pre-developed land for future sale. Land desirable for "Land Banking" is that which lies directly in the growth path of rapidly developing cities. The key is to identify these parcels well in advance, wait for their values to mature, and realize a significant profit upon the sale. California is growing by six hundred thousand people per year and half of that growth is coming to Southern California. "There is always a path of growth in California."
Historically, Residential Real Estate and the stock market have not appreciated at nearly the rate of pre-developed land in the path of growth of the Los Angeles metropolitan area. Comparing the appreciation pre-developed land to residential real estate or the stock market illustrates this point. Thirty years ago you could have purchased a typical house in Southern California for $25,000. Today that house is worth between $500,000 and $700,000, depending on location. If you had invested that same amount in the stock market, today it would be worth less than your house.
Yet if you had gone three to five miles, in any direction, outside of the Los Angeles Metro area, you could have purchased three acres of land for around $8,000 per acre. Today that land would be worth $7.5M to $15M, depending on location. This is the power of Land Banking.
Developers prefer to buy large pieces of land so that they do not have to deal with numerous individual land owners. A group of investors can pool their funds to purchase larger parcels and take title as "Tenants in Common." This makes the property more desirable to developers.
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