Land banking is the practice of buying and holding vacant or underutilized land in anticipation of future development. It can be used by governments to control development and preserve green space, and by private investors to make a profit. However, it can also be risky and subject to scams. Research and planning are key before investing.
In most countries, land is a hot commodity due to the expansion of cities and commercial development. Cities and developers are often consuming open land at a breakneck pace, hungry for space to build more homes, retail and offices. In anticipation of future development, investors and city, county, or state governments can buy and hold land that is vacant, rural, or underutilized at a reasonable price before its value skyrockets once it is finally found. on the path of development. This practice is called land banking.
When land banking is used by a city or county government, or even by a non-profit agency, it is usually to retain some control over the future development of a particular area. Some cities have been particularly aggressive in keeping suburban sprawl at bay, using land banking to preserve green space or halt growth altogether. Land banking can also be used for cities and counties to exercise control over how land is developed, controlling whether it is zoned for commercial or residential use. They can also stipulate to future developers that some or all of the land be used for low-income housing.
Land banking, when used by cities and governments, can also be a benefit to future buyers by keeping land prices in check. It also gives these agencies the ability to build new schools, parks, and other city projects on land that may be too expensive for a limited city budget, but is necessary for expanding cities.
Land banking is a practice also used by private investors who take a chance on what is usually cheap and undesirable property in the hope that when the growth comes to them, they will make a significant profit. Donald Trump, Howard Hughes and Bob Hope are famous land bankers, buying up vast tracts of land in what are now highly lucrative areas like Manhattan, New York, Las Vegas and Southern California.
For many private individuals, no matter how cheap the land is, they may not have the necessary capital to participate in land banking. Many land bank scams have sprung up, especially in the UK, to attract these investors. These involve land banking companies buying up large tracts of land and dividing it into smaller, more affordable parcels. Unfortunately, the investor may be buying land that will never be developed due to zoning restrictions or other limitations.
If you’re looking into land banking, research zoning laws and visit your city or county planning department to see if there are any future plans for the area. Although Mark Twain gave sage advice to “buy land, (because) they don’t anymore,” land banking is not guaranteed to be a lucrative investment.
Smart Asset.
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