Another string to the bow of a successful real estate property investor is land. As an asset land investment can be very lucrative if you can find and develop the right plot.
This must always be seen as a long term strategy, even more than residential property investment, as it often requires you to buy the land and then wait for planning permission to be granted so that the value increase substantially at that point. You can then decide to develop the land yourself, partner with a builder or sell on and take your profits.
Once your name has been taken at one or more property events then you will start to get e-mails and/or calls from a number of companies of various land property investment inc type names offering you deals. These plots of land are usually located in the green belt and outside of current planning boundaries, but the salesperson will always regale you with the fact that their team is now working on getting the permission changed for building houses.
In the majority of cases, despite what has been seen by scaremongers in the popular newspapers, most of this land will not change permissions in the short or even medium term so you will be investing your money for the long term.
There are two simple ways of finding suitable land on which you make money though in the short to medium term (1-3 years), one of which I explain below and the other is one I teach my students.
My first strategy for finding land involves my favourite past time, walking around residential areas and looking for opportunities. What you are looking for specifically are houses at the end of a street, but that have a sizable side plot onto which a 2/3 bedroom house could be built. This strategy is usually only applicable to terraced properties as adding a new end-terrace property will not affect the look or style of the street. I have seen it done to semi-detached properties, but the timescale was towards the end of the 3 year period and required a lot of investment in solicitors and planning appeals, etc.
You would need to build the new property in the style of the existing houses in the terrace and follow the design guidelines as laid down when originally built, but most local authorities are sympathetic if approached correctly.
You can also look for houses with large and long gardens and see if a new detached house could be built in the space. Again here, if you can meet all the planning regulations, local authorities are sympathetic.
How would I approach the homeowner in whose land I am interested? Firstly, after doing my research, I would look to see if they would be prepared to sell the house to me, but offer them a one year rent free tenancy of their existing home. This can, and does, work with elderly couples who may be looking to cash in on their house, but do not want to move away from the area. You also assure them that they can live there after the end of the first year at 10%, say, below market rent for the area.
Secondly, I would just ask them if I could buy the land and, in broad terms, tell them my intentions. At this point, some people will revert back to option one and others will throw you out. You may then find, in a few years time, as I did, that they have done the build themselves and good luck to them.
I did not say that the approach was always successful, but I have found in my property investing career that you look at 100 properties, make offers on 10 properties and end up with 1 so the more you look at, the likelihood is that you will buy more.
Remember though, if you are using your own capital property investments like land and residential dwellings will take longer than if using my favourite, OPM or other people’s money.
Good luck and good investing
Dave P Thomas.