Land banking involves purchasing undeveloped or underdeveloped land in areas expected to grow or appreciate in value over time. The investor holds the land, often for several years, with the hope that the land will become more valuable due to future urban development, infrastructure projects, or changes in zoning laws. Once the land’s value has appreciated, the investor sells it for a profit, often to developers or buyers looking to build on the property.
Key Characteristics:
- Long-term investment: Land banking is typically a longer-term strategy, with investors holding the land for several years until market conditions or development projects increase its value.
- Speculative: The investment is speculative, as the value increase depends on external factors such as urban expansion, zoning changes, or economic development.
- No immediate income: Unlike rental properties, land typically does not generate income while being held, which means investors rely solely on capital appreciation for profit.