strategies to land banking
Land is something that most Kenyans are in love with. I am convinced that if Moses had been leading Kenyans to the promised land. It would have just taken 2 days. With all jokes aside, there is a growing concern about how we are doing it. Most people buy land for speculation, and while it is a valid way to invest, you guys are doing it wrongly.
In this blog, I will be showing you some tips on how you can speculate in a better way. Or better yet, if it’s a worthwhile way of investing.
what gives land its value?
To start us off, let me give you the basics that make land valuable. Land is an immovable asset, which means it cannot be moved. With that in mind, for it to gain value, it absorbs the value of what surrounds it. Land in Westlands is only valuable because it has absorbed the value of roads, infrastructure, and quality of life the area presents.
Did the land do anything to gain this value? No. It was just located in an area where the value met it. And with this value comes demand that fuels growth.
picking the location
At this point you definitely know that picking the right location is the make-or-break of any real estate investment. Where you buy land really matters. I have seen so many people buy land in very remote parts of Kenya. Remember the Malindi plots of the 2020s?
You need to pick a location that is showing signs of growth. We live in a data-driven world, so do your research to answer questions like
- How has the population of the area grown in the last 5 years?
- Are there any businesses coming to the area?
- Is the area being occupied currently?
- Does the place sit next to a transportation corridor?
is the area earmarked for development?
Another basis for choosing where to buy is the future development of the locality. One tip I would like to leave you with is INVEST WHERE THE GOVERNMENT IS INVESTING. If you notice the government building schools and roads and setting up institutes somewhere, BUY.
The truth is, such developments are done to attract people to an area. The government does this to catalyze productivity in the economy. By observing such moves, you are better placed to benefit from the interest and future growth of the area.
You can get such news by;
- Following the news, look out for launched projects
- Check areas where the government is allocating money in its budget
- Track ongoing infrastructure developments, e.g., an ongoing road route.
- Look at the expansion of universities to the area.
Like everything that leads to success, you must do your fair share of homework. Don’t just buy blindly; have data and research to back up your decisions.
How is the Existing infrastructure?
You also should buy in an area with some form of existing infrastructure. Or better yet, upcoming infrastructure. Things like good roads, electricity, and water are the main attractions for people to take notice of in an area. These are the basics of today’s civilization.
If you buy land in a place where none of this is running, it may take a long time for land prices to appreciate. Land, as previously mentioned, absorbs the value of what surrounds it. If you have nothing surrounding your land, how will it gain value?
If your goal is to increase your wealth through land banking, this is a crucial consideration. Only buy in places where you are seeing infrastructure growing or signs of the same.
Can the land be utilized?
An idle mind is the devil’s workshop, and so is idle land. Idle land will cost you in terms of maintenance and time. So if you want to buy land, ask yourself what you can do to earn from it while its value goes up.
Can you plant some trees? Can you keep some livestock there? If you can have the lot earn you money, in the future you can use that viable business as a selling point to milk more from the sale.
How easy will it be to sell?
One downside of land is that it can be hard to liquidate. Compared to other assets like stocks, you can’t easily pull out your money when need arises. Buying land without any strategy and in a poorly located area adds to this downside.
Ask yourself, how straightforward might it be to sell?a need If you get to an area and don’t notice any land for sale banners or any agent offices around. Chances are it might be hard for you to sell in the future. Which draws to the point of buying where people are buying. In this case, if you need to sell, you will have someone available.
What is the quality of the lot?
Buy as if you will build and live there. If asked about the land you want to build on, you’d surely list the best qualities. The quality of your lot impacts many factors.
- The ease of construction
- Drainage of the land
- Resale values, etc.,
I have seen people buy land that is either in a swampy area or in really terrible condition. The only cure for this is to GO FOR A SITE VISIT before buying. And make sure to go with another person for multiple assessments; they might help you see something you might have missed.
If you are in diaspora, send a trusted person to view the lot. Most people may take advantage of your absence to sell you overpriced land in poor condition.
What is the Price?
Lastly, check that the price you are buying for is the correct market price. The one rule for making money in every market is BUYING LOW and then SELLING HIGH. If you are not careful, you may buy land at a hiked price. This means that even after waiting for it to appreciate, you may not exit at a good profit.
Imagine you buy a piece of land whose fair market value is Kes. 500,000 at, say, Kes. 800,000. After waiting for 5 years, you decide to sell it, only to resell it. Only to realize that land there is selling at Kes 750,000. In this scenario, your loss amounts to Kes 50,000.
There are many greedy people out there waiting for a chance to scam you. Please ensure you have taken the necessary steps to protect your money and investment.
Conclusion
Let’s conclude this discussion. Land is an investment, but it is not the only investment. We live in an age where we are spoiled for options. Avenues such as the stock market, money market funds, and the bond market are strong contenders for your money.
With this in mind, the purchase does not make any economic sense. You can invest elsewhere as you wait for another great opportunity. Don’t be overly sentimental with land buying; instead, ask yourself if the math is mathing.
