You need to be a sophisticated investor to make the big profits in land banking. Being a mum and dad style retail investor won’t cut it.
Here’s how to see if you are a retail investor, meaning you have to pay retail for investments for the rest of your life or a sophisticated investor and qualify to access wholesale land deals where savvy investors turn $120,000 into $1.2million in a decade.
Plus, this is why councils can’t tell you if (and when) a wholesale land project would be approved and why ringing them is a waste of time?
Firstly a wholesale land project (that offers you the chance to turn $135,000 into $1.2 million in 10 years or so) only exists when the land is currently outside the current Urban Growth Boundary or not currently zoned Residential.
If it is already inside the UGB or zoned Residential and is automatically going to be rezoned residential by council then land prices already adjust to reflect this and thus a lucrative opportunity doesn’t exist.
You could go and buy land at retail if you want this sort of guarantee and build a home on it, however, that’s not Land Banking nor will you make large potential profits.
Land Banking is when developers use foresight to buy land with a view to rezone in the future; and they lobby the council over years to get the rezoning or often won’t even apply for 10 years to get rezoning.
This creates opportunity for larger increases and profits in land value. However these developers generally are large ASX listed companies that won’t share these enormous profits with you unless you buy their stock in the ASX and then you’ll get maybe 4-5% dividend return, but never the massive windfall that developers make.
If people who want to qualify to buy an option in one of our highly sought after land projects ring the council wanting some sort of guarantee that it will be developed, it just won’t happen.
Why?
Firstly it’s not their job to answer development questions about a project at a wholesale stage, which hasn’t been submitted to council and may be years away from being submitted. It is rather annoying for them.
If they categorically said yes that it will be rezoned and approved (which they can’t) then that would be the worst news you could ever hear.
Why?
Because the land would be worth ten times the current value already and we would never be able to let you acquire an acre of land that could be acquired for say $135,000 option.
It would more likely be $500,000 or $1 million and the opportunity would vanish for you to make such profits.
The council staff can only state what the current guidelines are, period.
Let’s use the example of Wallan and our Secret Valley Estate Project 45 minutes from Melbourne CBD.
It’s outside the current UGB and will remain outside even when the boundary is extended in a few years.
Council will say we have no plans at this stage to apply for rezoning that area as we have 50,000 potential house lots that can be developed inside the new UGB
Thus, as far council is concerned, there is nothing to talk about.
The thing about bureaucracy; their position (in the long run) is somewhat irrelevant as based on these supposed guidelines half the housing estates around Melbourne and Wallan wouldn’t exist today. Yet they do.
In recent years, the Mitchell Shire Council, which includes Wallan have approved numerous developments that were and are going to remain outside the UGB. You can Google and find many of these selling retail land as we speak.
According to their same guidelines, these should never been approved, however they do so today.
In fact they approved the “Hidden Valley ” estate over 30 years ago.
The UGB was a long way from Wallan back then, and Hidden Valley will remain outside the UGB for years to come. Yet it exists and is growing still to this day. Therefore, relevancy of the Urban Growth Boundary (UGB) is limited. UGB simply means the council at some point in the future will rezone it where if it’s not UGB it will require developers to submit rezoning request to try an achieve a rezoning.
See the article “developers Jump the UGB in the due diligence kit ” to understand why these areas the council will automatically rezone at some point which drives the price of land up to often unsustainable levels.
Outside UGB they won’t approve a rezone unless a developer successfully lobbies over time and gets approval.
An irrelevant statement is that Wallan will have room for 50,000 new houses inside the UGB to cover demand for 20 years.
Bureaucratic government departments can say such things that sound good but mean little and to be a sophisticated investor we need to learn to look past it.
The statement above is assuming that all the land owners inside the UGB will suddenly develop the desire (and skill set) to become land developers. How is the council going to enforce that they stop their current activities on their land and develop?
They can’t and most won’t. To see for yourself, drive from Melbourne to Wallan and you will see thousands of acres of UGB land with not a single house on it.
Why?
Because making something UGB doesn’t mean houses will be built as developers will build where they want to build.
A wholesale land deal only works long term in areas outside UGB that’s why it’s called wholesale. Retail land is land that’s already approved and that’s why you pay retail prices.
But then again in our land projects what risk do option holders take? The option is secured against real estate and if the development isn’t approved in a certain time frame it becomes 100% refundable.
There an upside to turn $135,000 into $1.2m, and downside you get your money back.
You can even apply to transfer to an alternate project that may get approval sooner.
So to be a sophisticated investor and take advantage of land banking you can’t expect retail security. Retail security is for mum and dad investors and not sophisticated investors.
That mindset doesn’t get you a pass to be a partner in our projects.
We have retail land, which we can offer those with that mindset in UGB that council is rezoning residential without us needing to apply for rezoning.
Wholesale and the big profits are not for those types of investors.
So you need to decide if you’re a sophisticated investor and if so then such an investment can be suitable.
If not a retail type offering with less risk is more suitable.
For more information visit LandBanking.com
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