Personal Finance and Investment

Land banking is a comparatively new investment model that enables smaller investors to buy a bit of valuable land.

How does land banking work?

When large tracts of land are offered for sale, they are generally a way too expensive for a small individual investor. Land located in a place suitable for business or residential construction is typically either purchased by a private property developer or by a land investment firm. After the purchase, the owners hold onto the land until they are prepared to sell or develop it. During this period, they can split up the land into smaller, more affordable sections and sell these smaller pieces to investors in private sector. By holding the freehold to their land, each investor can sell it at any time, though the highest revenues are usually obtained when a holder is granted planning permission for their site.

What are the costs?

The price of the land for small investors will depend on the land type, the potential for development and its size. For about £5000, small investors can acquire a sizable parcel of land in a prestigious area. If, however, you choose to spend more, the land pieces are usually divide up by size to suit a range of investors.

How difficult is it to buy?

Land is much easier to purchase than home. You are still, however, required to sign a legal contract, and therefore it is worth getting your solicitor to check it before signing. Because the nature of the purchase is relatively simple, it can often be completed within a month.

Will I be able to sell it?

In virtually all cases, when you purchase the land, you simultaneously get the freehold. This implies you have the right to sell the land whenever you want to. Most investors, though, keep hold of their parcel of land for 2 to 8 years, to make profit from the development of the land, but you can sell your piece at any time.

How do I start?

If you feel like giving a try to land investment, you should talk to a land agent. They may have a selection of sites on their records and offer you their experience and expertise to lead you throughout the process.