Land Banking - An Alternative Gateway to Wealth

When it comes to investing in real estate most people think in terms of either residential properties or commercial properties, whether it be condos, single-family homes, apartments, shopping malls, or office buildings. Few real estate investors, however, ever think about raw land. Most are deterred because they think its too speculative or not a good investment because in most cases there is little or no monthly cash flow.

Land bought right, however, has more upside potential than most income producing properties period.

Rich Dad, Poor Dad, Rich Uncle, and Mega-Rich Uncle

Investment Guru, Robert Kiyosaki touts how he learned about investing from his Rich Dad (a friend’s father) and his Poor Dad (his real father); I learned about real estate investing from my rich uncles, and my mega-rich uncle.

My uncles did well for themselves growing the family supermarket business that my grand parents started decades ago. The flourishing business expanded and provided them with capital for investing. While most of my uncles became even wealthier from investing in both residential and commercial properties, one of my uncles decided to invest in large orchard fields just outside of Sacramento, CA.

Most people thought he was crazy to buy orchards, especially since he didn’t know anything about farming. What most people didn’t know, however, is that he had the foresight to see how much the city was growing and he strategically purchased these orchards because they lay right in the path of that growth. You see the value was not in trees but in the location of those trees. He was right; the city kept growing right through and past his property, which ultimately transformed my rich uncle into my mega-rich uncle.

My uncle’s story, however, is not a new one, because for centuries the same scenario has repeated itself over and over again, as cities and towns grow and need more room for expansion, adjacent landowners (usually farmers) become rich from selling their land.

Land Banking the perfect investment for your IRA or 401K

If you have some time before you retire, land banking could be the perfect investment for your IRA or 401K. The barrier to entry is lower than other real estate investments since land usually cost less and the upside of your land investment could be huge. Just remember the trick in land banking is to correctly predict where growth is going to happen within a reasonable time frame (before you retire), select an appropriate piece of property in the path of that growth, and before you purchase try to ensure that you or someone else will be able to develop that land at some time in the future.