The risks associated with Land Banking if practiced as intended a long-term appreciation strategy, the risks are very, very low. However there are some risks that should be taken into consideration prior to making a purchase:
- Land Banking is not a readily liquid investment. At LandDiva, we suggest that you plan ahead as to when you may need to sell your parcel of land. It may take 6 to 12 months to sell a piece a property for its full value.
- Since your purchasing pre-developed land, often without zoning or entitlements in place; cities, counties and planning commissions can modify master plans or create on foreseen obstacles—potentially decreasing the value of your property.
- High property taxes can impact your cash flow and reduce your return on investment. Make sure your Land Banking in an area that has historically has had low taxes assesses on undeveloped or predeveloped land.
- Like any investment strategy, diversifying your portfolio over multiple items hedges your opportunity for loss or benefit. We suggest, resource permitting, that you purchase two or three parcels in different areas.
There is no such thing as a perfect investment, but Land Banking does have one key advantage over most others which is best expressed by Mark Twain “Buy land, there not making it anymore”. We even take it a step further by suggesting that you purchase select pre-developed land with the help of one of our Land Banking Specialists. Contact us to learn how to get started.
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