…a friend of mine told me that in the pub last Friday. It’s something a client of his tells him time and again. Last time I looked, his client was worth £1.3 BILLION in the Sunday Times Rich List. Apparently this pearl of wisdom is the cornerstone of his wealth creation strategy – and it’s obviously worked very well for him!
When you think about it, this nugget of information is the very reason that land has always been considered a solid investment. Yet, without a great deal of capital it’s always been considered difficult to buy land as an investment.
When you combine a rising population with a chronically slow and reactive planning system – together with the public mentality to new development of “not in my back yard” – you soon get a recipe for rising land values.
Development is so restricted in the UK, that when we do obtain planning, the difference in the land value is often immense. So while it’s perceived to be difficult to acquire land for investment without capital, the case for doing so is, and always will be, very strong.
Thankfully, for us mere mortals (not billionaires!), it is actually possible to acquire “control” of land for very little capital… if any!
How?
With the use of a little-known gem called an Option Agreement. In fact, an Option Agreement can enable you to control land for just one pound. And crucially, while you have “control” of that land, you can increase its value by 200 times or more by obtaining planning permission to develop it.
For those of you who’ve been reading my blog, you’ll already know that this is something I’ve been doing successfully for some time now. Due to the recession, I will be the first to admit that, until recently, my land deals took a backseat.
However, as we now seem to be coming out the other side, I’ve started actively searching for new opportunities once again. As many of you know, I also help to run LandLounge.com – an internet-based land agency. Here too, we’ve noticed much more activity in the last few months. In fact, we’ve agreed two sales just this week.
Land investment is actually a great opportunity. It’s the ideal way to generate income for anyone that’s willing to learn the ropes – just like becoming a buy-to-let landlord. If you’re willing to put in the effort and learn the methods of sourcing and appraising, it offers significant rewards.
We’re not talking rewards that pay £150 per month “positive cash flow”. No. We’re talking rewards that can clear your mortgage in one fell swoop.
For the more experienced, the rewards can be huge. I brokered a deal recently that is yet to go through planning, but we’re told it will get the support of the Local Authority. It’s a site that was purchased for just – wait for it – £5,000.
How much do you think this site will be worth after planning is granted?
100k? 200k?
At the beginning of the article, I said it’s possible to increase land value by 200 times or more by obtaining planning consent. Well this deal was an exception. This particular piece of land purchased for just £5,000 will be worth at least £8,000,000 after planning. Yes – EIGHT MILLION POUNDS.
Now admittedly, sites like this are rare and 20 years had passed between purchase and submission of planning application. However, suppose it was you that bought the wasteland 20 years ago and were now sat on £8 million?
You don’t need deals like the above to make life-changing sums. I always advise people to start small – perhaps look for single plots and work your way to bigger deals as your confidence and knowledge grows.
My ideal sites have been those up to two acres in size. Sites like these are often overlooked by developers especially if they have existing buildings or uses that make them less obvious. You will also find that there are deals-a-plenty right on very own your doorstep. It’s just a question of knowing where to look…
I recently described how I made £300k profit on a site in Bolton in just 9 months. I’ve completed lots of other planning gain deals such as a barn conversion that made £230,000 profit, a pub that made £80,000 profit and an old church that made £125,000 profit.
Basically, my point is this: You don’t need to be a billionaire to invest in land if you know how. But if, like me, you want to become one, then take on board our opening pearl of wisdom…
Buy land. They ain’t making any more of it!
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