HOW TO CREATE A GENERATIONAL WEALTH THROUGH LAND BANKING IN NIGERIA
Undeniably, there are several qualified and potential real estate investors who have been looking for the best property investment in Nigeria. This article will educate you on one of the most profitable real estate investments in Nigeria with a high Return on Investment (ROI).
What is land banking?
Land banking is not a new business strategy in Nigeria. It has been around for a while, but it has been mostly under pronounced, under-discussed, and under-utilized. Like every other real estate investment portfolio, many informed and smart investors have taken advantage of this strategy to create wealth for themselves, despite its low popularity.
A handful number of people have been giving different definitions to land banking, but I’ll prefer to define Land banking as a business strategy of investing in prosperous land in an undeveloped or semi-developed location, to keep it till the period of appreciation. In other words, it is the process of buying and nurturing land until the period of maturity and selling at a higher price or adding value to it to generate wealth.
This is a simple strategy of investing in the raw land with the foresight that someday the land will become much more valuable due to external developments like the construction of roads, schools, and government institutions, among others, or from a development being built nearby.
Reflect on the state of your nearest major metropolitan area 10 or 15 years ago and compare it to what you are seeing today and compare the price of a plot of land in the same location then to what is obtainable today. Imagine, you invested in some plots at that time and you are selling them now. I want to believe that you are getting more than 10x of what you invested. That is the simple secret of the buy-and-hold land investing strategy in real estate.
Land banking is an aged proven strategy that has been in use for several years. This is the simple secret that some of our forefathers understood long ago that has been making some families prosperous ahead of others in terms of land wealth. For instance, in the same village or town, a particular family may have as much as half the total community land, which can create generational wealth for their children. On the contrary, some families in the same community will hardly own a plot of land. The simple reason for this is that the forefathers of the first family understood the secrets of land banking and they have taken advantage of it for the benefit of their generation.
Similarly, one of the reasons why a community or town is bigger than the other is the understanding of the secrets of land banking by their ancestors. What we consider as the community land today was once nothing more than free basic earth, majorly used for farming and other related activities, which were later secured or banked by the earlier settlers. So, the size of the land that was banked by them largely depended on their foresight, strengths, courage, and influences. Their population at the time was very small, but some of them understood that the population of their generation unborn may be exploded, therefore, they have to keep sufficient land for them. While others considered it unnecessary. What they banked then was demarcated with trees, streams, or other landmarks to distinguish one settlement from the other. What used to be considered a settlement then can now be referred to as a village, town, or city.
Arguably, the above explanation is a simple analogy to explain land banking and how it works for generations. Premised on the above, investing in the land has been considered one of the best ways to create sustainable wealth. This was as true 600 years ago as it is today. However, there are several ways of investing in the real estate sector, but land banking has been considered as one unique way, due to its flexibility and high ROI.
Apart from viability and flexibility, land banking also comes with a bundle of other opportunities, which I would be discussing with you in a moment.
The Benefits of Land Banking in Nigeria
Unimaginable profit: When you invest in land banking, you would have the opportunity to multiply your profit margin whenever you want to sell your land in the future. This is simply because you have invested in the land when the value is meager due to little or no development in the area.
Buying into the future: This will allow you to invest in the future because the land you buy now in a remote area and hold on to it would become a city in the future. This would give you the opportunity to become a landlord in the city and can add value to your personality and reputation in the future.
Building wealth for Children: This investing strategy would help in building a future for your children, as you can bank multiple lands in their names. For instance, if you bank a parcel of land for your 5 years old kid to keep for years and sell later in the future to send him abroad for study. This is one of the plans that can guarantee your promising retirement. Imagine, if you can do the same for all your kids at a tender age. You can even use the banked land to raise money for them in the future to build their promising business.
Building Collateral for more funds: In case you are planning to raise money for your business or a particular investment in the future, land banking is one of the best ways to guarantee the possibility. When you buy a cheaper land now and keep it for some years. When the land gets an appreciable value, you can use its document to access funds and facilities from banks or other creditors. This would help in creating more wealth for you in the future.
Generating cash flow through leasing: One of the most interesting parts of land banking is that it would create the opportunity to generate passive income through leasing. Imagine, you buy some acres of land and lease it out to some interested farmers to farm on it for an agreed annual rental. Or you buy some plots of land and while waiting for its maturity, you lease it out for some people as a mechanic workshop and you are generating cash flow from the rent. Additionally, your tenants on those lands may equally serve as security for the land.
Building a future empire: It’s arguably true that there is no king without an empire. What makes a king is not just the crown and his people, but also a substantial piece of land that can be considered a community. An in-depth understanding of the importance of owning land is one of the reasons why landowners are simply referred to as the LandLORDs. So, investing in a futuristic land would make you a future king in your world and create the opportunity to become a landowner in a big city with the big guys.
Opportunity to save money: It’s very important to understand that the money you saved in your bank account can also be banked on land. Instead of you lavish that money on an unproductive venture, you can always invest it in the land. Many of my clients have gotten this strategy right, and that has made them have multiple land investments. Some of them have set targets for buying up to 3 to 5 plots of land yearly, through land banking. This has been assisting them to save the excess money that could have been squandered.
Building a happy retirement: One of the very imperative things to be considered while in active age is old age. Millions of people live flamboyant lives while in active service without planning for their retirement or old age. Therefore, after retirement, life started showing them the other side of itself. Some of the notable rich men were dead in poverty, miserable, bankrupt, penurious, and fortuneless conditions. This is due to a lack of foresight in investing while it was raining. Therefore, investing in land banking can save one from living a miserable life at old age or after retirement.
Value Appreciation: Whenever you are investing in land banking, you should rest assured that your investment would naturally grow. Even in the face of an economic downturn, the land will never depreciate. The only terrible thing that can happen to your land is to maintain its value, and that can only happen for a while. The price will soon appreciate.
Minimal Start-up Capital: On like other forms of real estate investing that require huge capital to commence, land banking can be started with little resources depending on the size, location, strategy, and other considerations. Untapped land used to be very cheap, so that makes it more flexible and accommodating. One can use as much as billions of naira in land banking and at the same time, less than a million naira can also create wealth through the strategy. It depends on the above considerations.
How can you create generational wealth through land banking in Nigeria?
Through a simple Buy-and-Keep strategy of land banking, a lot of smart investors have been creating wealth. Nothing should stop you from joining the league of these smart investors. However, as much as I can be talking about the multiple benefits of land banking in Nigeria, there are ups and downs in the scheme, just like every other investment strategy. Taking note of the following tips will guide you to a successful land banking business.
Invest in a genuine land: It’s very fundamental to understand that the primary key to every successful real estate investment is authenticity, and it has to be given priority before other considerations. What I’m saying, in essence, is that whenever you are investing in any property, what you need to be considered first is the genuineness of that property. A property may be viable and feasible, but if it’s not genuine, investing in it becomes a waste of resources. Therefore, the first consideration in your land banking investment is the genuineness and authenticity of the land you are buying and this can be confirmed through a few steps that I’ll be discussing in my next article. You should avoid property scammers, bad allocation, and government acquisition, among other related issues. You can always contact Estate Code Nigeria Ltd for a free consultation on how to avoid property scammers in Nigeria.
Invest in an area that has the path of growth: Having clear foresight is one of the prominent keys in the land banking business. This would assist you in determining which land has a better tendency of prosperity based on the forecasted social infrastructure and demographic factors (population). Sometimes many people made mistakes by only considering prices instead of factors that would determine if a particular location has a path of future growth. Location is the single most important driving force behind the value of a property.
It’s an undoubted fact that “LOCATION” is a common mantra in real estate and is key to valuable real estate. Property in the right location sometimes sees its value double within a brief time. To profit from a land banking scheme, you need to determine where the growth is heading to. An excellent location means different things to different people, of course, but there are factors to be considered while determining a prime location. The following are parts of them; neighborhoods, topography, accessibility, amenities of a neighborhood, as well as a development plan. Other things to be considered are proximity to things like busy roadways, plans for schools, hospitals, roads, and infrastructural facilities. These can dramatically improve your land values in the area. It is not just the present amenities that matter, but future ones as well. In terms of accessibility, you should look for a neighborhood near a city with the possibility of city expansion to the location at the nearest possible time.
Protect and secure the land: Another very important thing to be considered in your land banking investment strategy is the security of your property. It’s very obvious that you are not buying the land for immediate development, you have to secure it for the future. There are a few steps to get your land secured.
- Survey the land if it has not been surveyed
- Conclude the process of the transfer of ownership
- Process all the necessary title documents and fill them in a safe and accessible place.
- Take possession immediately after buying
- Secure with a perimeter fence to avoid encroaching and trespassers
- Lease it out for farming, workshop, or other activities
- Visit occasionally or assign someone to inspect on your behalf
Add value to the investment: One of the best ways to create generational wealth through a land bank is to increase the value of the land you are banking through property title documentation and structural enhancement. How can this be achieved? For instance, if you are buying land without proper title documentation, it is advisable to process the title document immediately after the deal has been concluded. Although, you must conduct all the necessary research on the genuineness of the land before proceeding with the payment. Another way of adding value to your banked land is by constructing a perimeter fence and gate. You can also construct a temporary structure like a gatehouse to further secure the land. Many people have lost their lands at the hands of land grabbers because they have left the land unprotected.
Nurturing to maturity: The best way to get better value for your land investing is to bank it for a reasonable period in other to allow its value to grow naturally. That is why I described the scheme as the Buy-and-Keep strategy. In most cases, you will need to keep your land for a reasonable period just to allow other factors that will enhance its value to come in place. Such as infrastructural development among others.
Engage professionals: The easiest and most productive way of profiting through land banking in Nigeria is by making the right investment decision. Imagine banking an excellent land and completely avoiding government acquisition, property scammers, investment depreciation, negative cash flow, delayed allocation, land grabbers, and a bad location. Picture your investment 10 years from now, when your undeveloped or semi-developed land location has been fully developed with modern buildings and necessary infrastructural facilities.
You can only achieve all the above by engaging an experienced and qualified professional who can guide you through the process of investing in land banking in Nigeria. Estate Code is a reliable and trusted partner when it gets to land banking and other real estate investment in Nigeria. Fill out the form below to discuss your next real estate investment plan with us for your free consultation.
Conclusion
Considering the growing population of Nigeria and the projected urban growth rate, the professionals are very optimistic that the current bullish trend that characterized the Nigeria real estate sector will be sustained. This trend creates a tremendous opportunity for every qualified real estate investor to create wealth by investing in land. This makes land banking one of the most viable businesses in Nigeria.
If you are looking for a better way to create sustainable or generational wealth, land banking is a better option. All you need to do is to consider the above tips while banking your land to determine the best investment portfolio or consult an experienced professional to guide you through the best opinions.
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Written by:
Mall. Bashir A. Yusuf, CPM, AGIPM
MD/CEO Estate Code Nigeria Ltd
Email: [email protected]
Tel: +234 706 434 5848
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