What Is Land Banking In Real Estate - All You Need To Know
In this post, I have created a comprehensive guide that delves into the concept of land banking in real estate in lagos nigeria. This extensive guide explores the meaning of land banking, the benefits, the risk involved, the types of land banking and modern strategies to get the best returns from your land banking investment.
Whether you are a new investor in land banking investment in lagos nigeria or you are a seasoned investor in the real estate space in lagos nigeria. This well written guide would give you a better understanding of the important metrics you need to consider to make informed decisions when engaging in a land banking investment in lagos nigeria.
Landbanking is here to stay and as the proverbial saying goes – if you can’t beat them, join them. Join the landbanking millionaires but it is my purpose that you join the with your eyes wide open for the amazing returns.
What is Landbanking?
Land banking is a process of investing or buying undeveloped land in small or large quantities for the purpose of holding for a time frame and reselling when said land area is developed and wanted for any specific use. The purpose here is simple, buy land to hold for a time so you can resell at a higher rate depending on level of development of total environment.
Example Of Land Banking In Real Estate
For Example – A gentleman bought plots of lands a long time ago in VI for N1.2m naira when everyone wouldn’t even think of investing there because they see a water logged area. He bought the land regardless of what it looked like and when he was ready to sell 20 years later – The highest bidder won at $2m. That is land banking in a short story.
How landbanking works in the context of Lagos
Now that we have answered the question of what is landbanking in real estate in lagos nigeria, Lets look at how it works. This is 2023, Industrialization and Urbanization are still going very strong in the city of Lagos. Which means, people are looking for land to live, land to build companies, land to build recreational centers, lands to build offices and malls. And this doesnt look like stopping for the foreseeable future. As population increase, places that looks undeveloped right now, bushy will eventually get developed and you want to make sure you have positioned yourself in those places today so when reason for use for those lands come. They will be buying from you.
For example, there is so much urbanization and industrialization going on in the city of Epe Lagos and it is postulated that in the next 10 years, it would be difficult to find a land to buy for N10m in Epe but today, you can still get lands for as low as N800k.
The redline, blueline rail project of the Lagos State Government is opening up some otherwise dark and undeveloped area of Lagos and it is said that the development is going to make these areas easily accessible thereby ushering in an influx of people and drastically increasing price of real estatein this area.
Benefits of Landbanking in Lagos
A. Secure future development opportunities
B. Potential for substantial returns on investment
C. Preservation of land for strategic purposes
D. Contributing to sustainable urban planning and development
E. Supporting affordable housing initiatives
Risks of Landbanking in Real Estate In Lagos
You have seen the benefits of what is land banking in real estate and I am sure you want to jump in right now to position yourself for some great profit in the near future. However, it comes with some risk that needs to be mitigated against so as to stop you from shedding premium tears in the nearest future
- The cheaper the land, the more untitled it is and this means you have to factor in the ost of getting proper documentation for the land so you can become the bonafide owner.
- The rise of scam real estate companies and agent who sell and resell government land to unsuspecting victims.
- Not all land will be developed, you should be well aware of where people are migrating to and where businesses will be occupying in the next decade
- Land banking is not about only buying cheap lands in obscure areas. Diversify your investments
- For any land you are buying, put at the back of your mind that it is your duty to make sure such land are properly titled even if they are not yet titled at the point of purchase, you must factor in this cost.
- Understand zoning laws and what purpose government have earmarked each area of the state for – The city of Lagos has a master plan and all land mass of the state has been earmarked for some purpose even if it looks bushy and underdeveloped right now.
- Make your your land banking investment are done in areas free from government acquisition, residential areas and commercial areas.
Strategies for Successful Landbanking in Lagos
Before you engage in any land banking in real estate transactions, its important to understand due diligence – Due diligence will save you from loosing your money and not investing in a bad land. The purpose of landbanking is to buy cheap today and be able to resell same land tomorrow when it has appreciated.
Therefore, it would be a thing of pain if you bought land today, totally paid for the land and somewhere down the line, you lost such land because you failed to conduct due diligence before going ahead with the transaction.
Don’t Be Too Excited About Buying Land, Calm Down
Don’t be over excited when you come across a good deal. If it looks too goood to be true, it probably is.
Here are our frequently asked due diligence questions which helps you know the importance of due diligence and how to go about it
What is due diligence in the context of landbanking transactions?
Due diligence refers to the comprehensive investigation and analysis of a property’s legal, financial, and physical aspects before finalizing a transaction. It ensures that buyers have a clear understanding of the property’s condition and potential risks.
What aspects should be covered during the due diligence process in Landbanking?
The due diligence process typically includes a review of property documents, such as title deeds, surveys, and permits. It also involves inspections, assessments of property condition, verification of zoning regulations, and analysis of financial records, among other relevant factors.
Why is due diligence important when investing in land banking in real estate?
Conducting due diligence is crucial as it helps buyers uncover any potential issues or risks associated with the property. It allows buyers to make informed decisions, negotiate favorable terms, and mitigate potential financial or legal pitfalls.
Should I hire professionals to assist with due diligence when investing in land banking in real estate?
Yes, it is highly recommended to engage professionals, such as real estate attorneys, surveyors, inspectors, and financial advisors, during the due diligence process. Their expertise ensures a thorough evaluation and helps identify any red flags or hidden problems. However, a company like Korrect Homes works with all these professionals in ascertaining the status of a property before putting such property out to investors like you. With Korrect homes, you are covered.
How long does the due diligence process typically take?
The duration of the due diligence process can vary depending on the complexity of the transaction and the specific requirements involved. It can range from a few weeks to several months, allowing sufficient time to complete all necessary investigations and assessments.
Land Banking Strategy
Here is a strategy that has worked for successful land bakers in the city of Lagos.
It is important to note that buying cheap lands alone does not necessarily constitute a good land banking strategy. The cheaper the land, the titleless it would be, and the titlelessss it is, the more potential for risk.
For a good land banking strategy, it’s important to diversify your investment. I call it the 2 way strategy
- Buy Land Close To The City: This entails investing in titled mland close to the city – what this ensures is that you are able to cash out on this sort of lands faster as they are closer to the city and will experience urbanization faster than lands far from thriving environments.
Example: Sangotedo,Abijo, Awoyaya, Lakowe down to Eleko on the Lekki Epe Axis in Lagos are presently witnessing a surge in development and this places would experience development and migration of people faster than other part of the axis.
- Buy Land People Call Bush Today : This entails going to underdeveloped areas lagos and neighbouring states and invest in land there. They may take time to get to maturity as development gets there in trickles but when they eventually mature and everyone is looking to get a land there, you have already positioned to get the best payment for your land. All you just have to make sure that such land is free from government acquisition both present and and future acquisitions.
Example: Epe, Ibeju Lekki, Ijebu Ode, Ibadan are places that you should invest in right now for a promise of the return they are bound to offer in the future. This places look underdeveloped right now and lands are going to be sold here relatively affordable.
Building a diverse landbanking portfolio
It is important to diversify your portfolio when engaging in land banking in real estate in lagos because, most times the trajectory and expected development in an area that would bring appreciation to a property might not go as projected. Which means, development are slower in some places than in other places.
Knowing this helps you not put your egg in one basket and be ready to take advantage of wherever development decides to start for this emerging communities.
Government projects which is one key nfactor in a community development has been knowning to be slow to start and waste time to finish. There are times governments commissions a project to start and it doesnt until after 10 years.
Take the Lekki Epe International Airport for instance – Project has been commissioned to start since the beginning of 2023 and while we are still here waiting for the project to commence. Government is putting more energy at commencing the 4th Mainland Bridge.
What we are saying in essence is, don’t be fixed to one emerging area, diversify your investment for the best possible returns not only in Lagos but also look into other neighbouring state and stake your claims there.
Developing a long-term landbanking in real estate investment strategy
Don’t make this mistakes when it comes to landbanking in Lagos real estate or anywhere – Land banking is a long term investment project. Time must be factored in when engaging in a land banking model of making money from real estate.
Don’t be a speculator, be an investor. There is a sharp reason between these 2 set of people.
Speculators: They are everywhere, taking advantage of dips and speculations in investment vehicles.they are in crypto, real estate e.t.c.
In real estate, these set of people look for promising properties especially land and wait for when the company starts a price increase campaign, they rush to buy and immediately the real estate company increases the price,they begin to look to sell and jump from one whatsapp group to the other trying to sell a land they bought last week.
These set of people loose money as they hoped to make a quick buck but quickly realise that these strategy is wrong. When they eventually are able to sell the land, it becomes a distressed sale either selling at original cost price or getting a refund from the company with a 30% deduction.
Investors: These set of people have studied and understand the game and know investing in landbanking is not about making a quick buck. When it comes to land in Lagos, to get the maximum out of it, you have to wait.
Letting time accrue over a piece of land and watching surrounding development grow is what brings real value to a piece of land.
Understanding land ownership and tenure systems in Lagos
You must also understand the different land titles in Lagos Nigeria and anywhere you are investing in. From freehold title to excision to c of o and the likes. You must understand it all so you know what you are getting and the steps it would take to perfect such titles.
Case Studies: Successful Landbanking Projects in Lagos
Land banking can be so sweet and rewarding when properly done – There have been so many successful stories of individuals who have done this and made some cool money from land banking in Lagos. A recent story by Ibukun Awosika detailed how she bought plots of land in the olden days chevron for single digit millions and resold some years later for double digit millions.
There is also the story of a former contestant for the gubernatorial seat in Ekiti State who spent a lot of money to contest the election and came back broke and didn’t win. To recover and keep his business going, he put up for sale his land in VI and received offers as high as $2.5m. He however went for a lesser offer of $2m because he already accepted the $2m before the offer for $2.5m came in. Being a man of integrity, he followed through on the smaller offer he had accepted.
I am sure with these examples, you can begin to imagine how profitable land banking can be when done properly.
Landbanking can be very beneficial and rewarding when all the right strategies are put to work and the risk heavily mitigated. Its also a way of saving up for your future self and generations unborn. We at korrect homes has helped out clients both in Nigeria and Diaspora invest over N1b in land banking projects across the city of Lagos and Ibadan.
We have done all the hard work presenting you with viable options of lands and projects to choose from that would definitely swell your pockets immediately and in the future.
If you have any more questions about this or want more information. Don’t forget drop a comment and we respond immediately.