LAND INVESTMENT IN THE UK - Eight Things Smart Investors Know

LAND INVESTMENT IN THE UK - Eight Thingscrisis
Smart Investors KnowInvesting in land is the most lucrative means of
27th March 2007capitalising the UK's housing crisis. Supply pressure
Author: Leonard Montgomeryis being felt in both affluent and less affluent areas
UK land represents some of the best investmentup and down the country. The number of UK
land available. These eight facts, presented by acouncil homes has fallen sharply over the past 25
land planning and land investment expert, will tellyears, while homes rented from social landlords
you what wise investors already know abouthas increased dramatically, and owner occupation
investing in landhas doubled.
1) Investing in UK Land is a real assetThe combined effects of the above factors
You can see, use, and most importantly, build onmake investing in land a sensible choice when
investment land. You hold the legal title deeds toallocating assets in a UK investment portfolio.
your investment land as surety. There are no6) Investing in land is passive and hassle-free
complicated concepts in land investment, just aAll UK investments demand careful consideration
burgeoning demand for a finite amount of UK land.when entering and exiting the investment.
2) Investing in Land yields strong returnsHowever, some UK investments also demand
A finite supply of UK land partially explains itsactive management during the life of the
historically rising value, and implies it is unlikely toinvestment (e.g. equity and commodities trading).
depreciate. Mark Twain said, "If something isLand investment, on the other hand, is entirely
unable to be manufactured and the underlyingpassive, which makes it popular with many
demand for it is constant, then its value will tendinvestors. Investment land is easily managed and
to rise." Demand for UK land is, at the very least,investors should be fully apprised of their
constant. The property market increases reflectinvestment progress.
soaring demand for houses from an ever-growing7) Land Investment has low volatility of returns
population. Therefore, investing in UK land offersVolatility of land investment returns is an
strong returns. It is reasonable to achieve theimportant consideration. It refers to the extent to
equivalent of 30-35% annually in a 5-year landwhich the value of the investment rises and falls
investment project. This equates to compoundedin its lifetime. Less volatility makes it easier for the
returns of around 400-450%. Such returns areinvestor to know their wealth at any given time.
hard to realise with other UK investments.UK Land investing is not volatile and is actually
3) Land Investment is an investment in "the realrelatively predictable. The value of a land
world"investment tends to follow a linear path: in a 4-5
The value of property assets is clear andyear project, the value of the land investment in
transparent. This is not the case with all UKyears 0-3 will tend to rise relatively modestly by
investments, such as derivatives. Even withthe effect of 'organic growth', (what we
traditional equity investments, the averagecommonly term 'inflation'). The land investment
investor rarely knows whether the equity istypically rises sharply in value during years 4-5
genuinely under-valued (buy signal) or over-priced(should permission to build on the land be
(sell signal).achieved). The land investment may be divested
Stock market scandals resulting from accountingof at this time for maximum profit.
malpractice highlight the limitations of the averageThe wise investor knows that they can more
investor's understanding of their exposures. UKeasily estimate the future value of their portfolio
land investors are usually already active players aswith land investments than with other asset
homeowners, so they already have some marketclasses. The land investor can plan for critical
experience.future funding requirements such as school and
4) UK Land has a lower entry point compareduniversity fees, retirement planning, and health
with buy to letcare expenses. More concrete future planning
The price tag on a typical UK property is aroundmay not be so easy if the investor has
£200,000. A plot of UK investment land thatexposures that are more volatile than investing in
offers substantially larger relative returns is pricedland.
at just around £10,000! Remember that the8) Investing in land creates real wealth by
Iron Law of Investment is diversification,compounding returns
commonly known as "Don't put all of your eggs inAs we have seen, returns of 400-500% in a 4-5
one basket." Because land investment has ayear project cycle are entirely possible if an
significantly lower entry level than property, wiseinvestor chooses good UK land and an
investors can more easily practice the Iron Law.experienced land investment provider. Therefore,
A typical UK investment requires aroundan initial investment of £10,000 could grow
£200,000 but a diversified land investmentto £50,000. If these returns are then
portfolio could be created for less thanreinvested into another land investment project
£50,000! Investing in land, with its lowerwith comparable returns, then the initial land
entry point, therefore gives the investor moreinvestment could grow from £10,000 to
'chances' to pick a lucrative UK investment.£250,000.
However, it is by no means essential to build aSome of the most successful individuals are
huge portfolio of land investments: the keyenjoying the financial benefits from compounding
considerations for anyone considering investing inin land investment. This approach requires a
land are two-fold: choosing good quality UK land,slightly longer-term view, but the rewards are
and choosing a good land investment provider.significant. Compounding in land investment can
The 12 Land Investment Guidelines, located at willoffer more than just good investment returns: it
help you make these two choices.can create very substantial wealth!
5) Investing in Land capitalises on UK's housing