Land Investment, Building Plots & Investing in Land for Profit

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Land Investment, Building Plots Investing in
Land for Profit
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Over the past few years both the UK residential
and commercial property investment markets have
fluctuated significantly, at times struggling to
maintain capital values and investment returns.
You might therefore be led to believe that now is
also a poor time to acquire land investment
opportunities and building plots for development
but not a bit of it. UK Residential Land
Market Consider the following facts lets take
the UK residential land market first. In the UK
the residential land market is primarily affected
by demand from house-builders and property
developers which in turn, is linked very closely
to the strength of the housing market
itself. Generally, there are relatively few
development land opportunities available on the
open market at any one time, and therefore a
single house-building company desperate to
acquire good building land can push-up the price
for such sites much higher than normal a simple
supply versus demand situation.
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Optimising Investment Land Values Getting the
timing right to optimise land investment values
is vital, but the groundwork needs to be
completed well beforehand and all consents ready
and in-place as the market begins to reach its
peak. All this means starting the land value
enhancement process when the demand for
investment land is at a low point, and this is
usually when the best land acquisition deals can
be done.
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Land Investment Opportunities While it is true
to say fewer homes are currently being
constructed the future demand is significant with
a large under supply of new homes already causing
problems. Because of growing demand for land that
is capable of being built on house-builders and
property developers will at some point be forced
to purchase even more land with an allocation or
preferably with a planning consent already
in-place. You see, the major UK house-builders
have traditionally built-up their stocks of
building land (often called a strategic landbank)
which helps to cushion them against the time it
takes to buy building plots and development land
and then obtain the necessary planning
permissions for new homes. Over the last few
years UK house-builders have typically reduced
their land acquisition activities and so have not
bought as many new development sites, tending
instead to use up their strategic land
stocks. It is not rocket science to deduce from
this scenario that there will eventually come a
time when their land reserves reach a critically
low point. At this point they will then be
forced to buy more development land on which to
build houses. And if you own the types of land
that they want, then you are in pole position
when it comes to securing the best values for
your investment land.
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Greenfield Land Then there is the greenfield
land to consider. Greenfield land needs to be
correctly promoted and allocated for development
purposes before it can be granted planning
consent that, again, takes time. The amount of
development land currently being promoted by the
large UK house-builders and promotion companies
is reducing, therefore leaving a gap in the
future market. Enhancing Land Investment
Values In any case, never loose sight of the
fact that land is a tangible fixed asset its
value may vary but it rarely reaches zero, so it
always has a base value. The value of land can
also be significantly enhanced by activities such
as planning promotion, obtaining statutory
consents (planning permissions) or acquiring
complementary land interests. As we have already
discussed, house-builders and property developers
will usually look to acquire development land
with the benefit of planning consents although
occasionally they will manage the planning
processes themselves. As with any investment, to
get the best value from your land investment you
should always be aware of the underlying land and
property value cycles and look to sell your land
when demand is strong.
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• Different Ways to Invest in Land
• If all this leads you to believe that investing
  in land represents a good investment opportunity
  in the current economic climate you will no doubt
  want to turn your attention to the best ways of
  doing so.
• There are a number of direct and indirect ways
  for investors to acquire investment land assets
  that should be carefully considered and they are
• DIRECT LAND PURCHASE
• Direct land investment purchase where land is
  acquired in the traditional sense of ownership.
• COMPANY OR CONSORTIUM
• Indirect land acquisition, where the investor
  purchases a share within a formally structured
  company or consortium owning one or more land
  interests.
• SPECIAL PURPOSE VEHICLE
• Indirect land acquisition, where the investor
  purchases a share within a Special Purpose
  Vehicle (SPV) investing in one or more land
  interests.
• Additionally, there are other routes to land
  ownership and each has its advantages and
  disadvantages for an investor and you will need
  to consider them very carefully before proceeding
  to buy.

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• Investment Land Considerations
• Your own judgement is also called for when it
  comes to the detail of any investment land deal.
• Your access to sources of capital, approach to
  risk and investment strategy will all impact your
  decision making processes.It is often very useful
  to ask yourself the following questions
• HOW MUCH?
• How much are you prepared to invest in land? Or,
  better still, how much can you honestly afford?
• INVESTMENT RISK?
• How much investment risk are you prepared to
  take, bearing in mind that the greater the risk,
  the greater in all probability will be the
  reward?
• HOW LONG?
• What sort of time-scale are you contemplating,
  working on the assumption that when considering
  land investments, short-term is 1-4 years medium
  term around 5-8 years and a long term is anything
  in excess of that?

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Making the Most of Land Value Cycles
While the UK investment land market is fairly
fragmented and can be quite complicated to
understand, the essential point on which to focus
is the fact that once land has been allocated for
development the owner of that land can decide the
time-table for turning it into a consent to
optimise their position in the property value
cycle. As it takes time for land to be allocated
and planning consent to be granted the best time
to begin the value optimisation process is near,
or at the bottom of the property value cycle. In
other words, when property values are low or
stagnating. So, particularly if it is part of a
balanced property investment portfolio, it is
certainly worthwhile giving some thought to
investing in development land as an investment
opportunity.
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Expert Land Investment Solutions As leading
independent land and property investment
specialists Investment Property Partners offer
expert advice and support to clients across our
specialist areas of expertise helping them to
achieve their investment objectives. If you are
a property developer or investor looking at land
investments or development opportunities please
contact our property experts today to discuss
how Investment Property Partners can help you.