Have you been wondering how to make money buying land at auctions?
Have you considered partnering up with a home builder?
A little known investment strategy is land banking, where investors purchase land on behalf of home builders for future use.
Many publicly traded home builders have pools of investors they work with who buy land for the home builder at auctions. The investor then holds the land for extended periods of time until the home builder is ready to construct new homes.
Why This Works
Home building is a cash intensive business, so home builders are always seeking ways to maximize cash on hand. Having investors use their money to buy land means the home builder is able to free up the same amount of cash for daily operations.
Some investors go as far as beginning the development of the land for the builder, getting all the necessary zoning and civil engineering approvals out of the way which can save the builder many months.
How You Make Money
As an investor, you sell the builder the land for more than you paid. How much more is something you work out with the home builder in advance.
You are usually able to see a higher return on your money than most banks can offer, with the added protection of actually owning an asset during the process.
Why Builders Are Willing To Do This
Home builders are just like you in that when they need to borrow money, they know they will be paying interest. The challenge they face today is finding lenders willing to loan money. Or loan money at a rate that makes sense for the builder.
By partnering with investors such as yourself, the home builders can gain access to money they may not have been able to otherwise, and at a rate they can afford.
Why This Makes Sense For You
Unlike traditional investments where you simply put your money in an investment such as a mutual fund and have no say over how that fund operates, land banking allows you to have direct control of your investment. Until you sell the land to the home builder, the land is owned by you.
If you are seeking a new way to make money buying land at auctions, make sure you explore the opportunities that exist in land banking.
Alfred Wendler is a former real estate agent looking to help the first time home buyer buy their first home and achieve the American dream of home ownership. He loves to help others find ways to make money in today’s economy, and you can follow him at twitter.com/rehelpsite doing just that.
Photo Courtesy ConcreteForms.