Why now might be a good time for land bank in Lombok
When it comes to finding the perfect harbor in stormy weather, what better than a patch of dry land?
Even in these unprecedented times when Covid-19 has markets rising and falling like a tumultuous ocean, land banking can potentially be a safe haven for your money.
Often overlooked, the practice of land banking allows developers and investors to secure sites for future projects upstream in areas of potential growth.
Buying undeveloped land is relatively low risk as long as you do the necessary due diligence.
What is the land bank?
Investing in vacant land that has the potential to increase in value.
What are the potential factors for increasing valuation?
- Normal annual market growth
- Future increase in yields in site zoning, use and / or density of development, eg. Higher added value use
- Increase in demand due to population increase or tourism
- Improvements in infrastructure such as services, roads, highways and airports
Source: Invest Islands
Why a land bank?
- Empty land bought ten years ago will not have changed in size or shape, yet land is the part of a real estate investment that has the potential to rise in value.
- Historically, the land component is often viewed as a hedge against inflation.
- Often times, the land component of a property grows at a faster rate than improvements that lie above the land.
- Improvements such as buildings can often lose value over time and can eventually become commercially unviable
- Often, properties with a higher real estate value as a percentage of its total value have the potential to grow at a higher annual rate.
- Since the new coronavirus was declared a pandemic, there has been a trend in real estate investigations seeking safer, lower risk investments to invest capital.
How do investors know if a site is suitable for land storage?
According to Invest Islands, the strategy for individual private investors is to find a location in the early stages of development – a place where you can still buy land at relatively low prices before the world sees its potential value.
Torok Beach in Lombok, Indonesia. Source: Invest Islands
- Dimensions – The size and shape of a plot could determine whether it is suitable for development.
- Topography – Is the land capable of naturally accommodating services such as sanitation or will pumping be necessary?
- Obstacles – Is there any part of the natural landscape that would affect future development?
- Neighborhood – Which properties are the most important in the area? Is there a type of development that might be more suited to what already exists?
- Population Growth – Is the property located in a corridor of potential population growth?
- Tourism Growth – Is the property located in a potential tourism growth corridor?
- Zoning – Does the property have the potential for better change of use, for example from agriculture to housing?
- Infrastructure – Are there plans for future highways and airports as examples?
- Close to beaches or natural waterways – Located close to beaches and natural surroundings of attraction, e.g. views, beach access, etc.
What is the exit strategy?
Once you’ve determined that it’s time to sell your land reserve, the exit strategy can often be one of the three options below:
- Sell all or part of the land to a developer
- Develop the land yourself to realize both land value and developer profit
- Co-develop with a developer partner to realize the value of the land and share the developer benefits.
How to land in the bank?
- Do your due diligence, seek independent professional advice, negotiate and buy your land investment.
- Often times, investing on your own can be limited by your budget. By investing with a group like Invest Islands, you can benefit from their experience and participate in real estate banking from as low as $ 35,000.
Click here for more information on Invest Islands.
THIS IS A SPONSORED FEATURE ARTICLE