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How Land Is Purchased At An Optimal Low Price
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Purchasing land at an optimal price requires timing and skill from the investor.
Several factors can affect the current and future of undeveloped land, not the least of which are specific characteristics of the property itself and the overall economy.
The first aphorism of investing is simply this: “Buy low and sell high.” The second may well be, “easier said than done.” Both apply to the business of strategic land investment in the UK.
First, understand that investment in land, particularly undeveloped tracts, is growing due to key factors: a net population increase of 7 percent over the past decade, plus a housing shortage that is already facing pent-up demand that might reach dizzying heights with a post-recession economy. Add to that the Localism Act of 2011, which alters the rules by which land use designations are changed (i.e., more power to local councils). Decisions are now made by local councils that were formerly the province of regional agencies; this can help or hurt investors’ chances for achieving optimal return on an investment.
It may help to break the equation into four distinct considerations:
Look for the dips that precede demand – Basic, and that’s exactly where we are at now. Land prices are low as a result of the economic downturn. The economy still has a long way to go to achieve full recovery, and population increases will multiply the effect that has on housing demand.
Anticipate the needs of the seller and the eventual buyer. The seller may be a single entity (a farmer or inheritor of a land tract, for example) or several parties. What are their financial needs? Why would they choose to sell – or not? Can a good price be negotiated? As for buyers, it is about anticipating demand for the land’s ultimate use designation, be it commercial, residential or industrial.
Even in a heated market there are opportunities. Where specific properties offer strong upswing potential.
Have good local knowledge on the property in question. Towns that can provide housing will also be able to attract employers, but not all local citizens want or need such local development. Before buying a property, it helps to understand the local mood and propensity to see development as a good thing, then create a land site assembly package that fits the extant neighbours’ needs.
The most effective means for those looking at alternative investments is to work with land acquisition and development specialists who do extensive research on properties that meet each of these considerations. The potential investor should seek objective counsel from a professional financial advisor to understand where land might fit into their overall financial planning.
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