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Thinking of buying land – why?
There is a common saying in investment circles, ‘buy land, as they are not making more of it!’, The presumption being implied here is that land is a finite resource, (though there are recent examples of Islands being built into the sea, such as the successful floating islands in Dubai) and demand will increase as stocks dwindle, making it a great investment. On the surface this seems like sound advice, however, like in any investment you do need to apply a little (or even a lot of) knowledge.
I read an article recently in which it was claimed that a man spent his life savings on a piece of land based on the gamble that the land had a medieval settlement buried underneath it. I get the impression that he actually had more evidence to support his purchase than the newspaper implies. I’m presuming that his piece of land is now worth considerably more than he bought it for, even though profit may not have been his initial motive.
Buying land as an investment is buying into potential, it has the potential to be something else, and turning that potential into a paying asset is the key.
I like to use the analogy of the Leonardo Da Vinci’s, Mona Lisa. The canvas, before Leonardo laid his brush on it, was worth very little, it’s potential to become a timeless masterpiece was only possible due the creativity and skills of its owner.
So back to land, what potential does your desired land have? – There are an infinite combination of factors that could contribute to this, however the most well-known and one which certainly can turn your land into an investment is planning permission.
Gaining planning permission in my experience can be more of an art than a science, you need to have the right people around you to maximise its potential, councils have strict guidelines, maximising the lands potential whilst sticking to these guidelines is tricky business.
Now let’s imagine you gain planning permission to build some great looking apartments, you manage to find a builder who builds at your desired budget, you manage to raise the finance, you build without any glitches and then …………….you don’t sell or rent a single apartment. If you can’t sell or rent the apartments, then you have just wasted a significant amount of time and money. This is a hypothetical situation, but does highlight the combination of factors in identifying ‘potential’.
With the above in mind I am a firm believer that it is the people you have around you that give the land it’s potential (leveraging other people’s knowledge,time,money through joint venturing is key: see article on joint venturing here:http://www.prosperbyproperty.com/single-post/2016/08/26/3-Ways-To-Find-A-Joint-Venture-Partner), even if it already has planning permission, you need to be able to build at the correct cost and sell/rent at the back end. Estate agents selling land will often value a piece of land based on it’s potential, unfortunately many agents are not very good at this, they often over estimate it’s potential, as they overlook many costs in the process of planning, financing and building.
If you get the correct team around you and become knowledgeable in the above as well as many other issues then buying land can have the ‘potential’ to make you wealthy.
We (myself, Shaun & Mike) have a development company ‘Mantra homes’, we consistently practice the above, turning a lands potential into a paying asset or liquid cash. If I can help you in anyway identify your (desired) lands potential then don’t hesitate to get in touch.
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