Sunday, June 28, 2009

Land Banking

What is land banking? - Land banking is the acquisition of land in advance of expanding urbanization. The price of an open space parcel not yet subject to urban development pressures will probably be more closely based on current rather than speculative land uses.

What are the benefits and upsides of land banking?

  • Land has the potential to experience tremendous appreciation if bought in the way of growth, or if a higher and better use can be achieved.

  • Owner financing can often be obtained through the seller at below-market rates.

  • Subdividing can create added value and provide for immediate returns.

  • Bricks and mortar depreciate, well selected land increases in value.

  • Land is in limited supply “they just aint making any more of it”

What are the potential downsides?

  • Negative cash flow; usually the land does not generate any income while you pay the principle, interest, taxes and costs of development.

  • Tax advantages are scanty as land cannot be depreciated.

  • Generally, raw land is considered a long-term ill-liquid investment that often takes time before gains can be realized.

  • Risk of loss on resale can occur if you choose poorly, fail to evaluate and negotiate properly, the economy slips or various other unforeseen events occur.

  • It is difficult to obtain traditional financing on or borrow against accrued equity.

When buying land for land banking what should you look out for?

  • The worst you can buy is swamp or marshland.

  • Most often flat land is the least expensive to develop and the most desired for building purposes.

  • Land with barren rock will increase costs and virtually eliminate a basement just the same as a high water table.

  • Plots with trees, a view, rectangular in shape, a gentle slope or none and a good location are most preferred.

  • Streams can boost values by 100% in some cases.

  • Many people are literally being driven to the hills. Granted the views can be spectacular but roads, utilities, water, sewer, and foundations, such as pilings, can add to building costs

How does Finca Di Pacifico Dos stand out?

  • Teak growing on your plot offsets the negative cash flow – providing a positive cashflow at harvest, prior to onward sale or development of your plot.

  • All plots come with permission to build one residence

  • Services - water and electricity are on site.

  • Many have river views and sea views

  • Tourist development is quickly encroaching on Finca Di Pacifico Dos with a new marina under development, the opening of a new port and docking facility in Puntarenas and many new hotels in Puntarenas and surrounding areas.

  • As the baby boomer generation begins to retire your teak will have matured and be ready for harvest as demand for land continues to rise.

  • There are multiple exit strategies

Finca Di Pacifico Dos may be “the perfect investment”, the teak providing a secure return whilst the land has the potential for spectacular increases in value.

So you can invest right now and have a rich future!

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