Independent financial advice - looking at land banking
If you are a small investor, get independent financial advice before you are tempted by land banking
What is land banking?
The name says it all - land banking involves a single company buying a piece of land that may or may not be developed in the future. This land is "banked", or kept until such time as the company decides to sell or develop it. As land is at a premium in the UK, and the government is setting higher and higher targets for new builds of affordable housing, investing in land should be a sensible option. But before you take independent financial advice regarding land banking, there are some concerns you should think about.
Targeting the small investor
Land banking allows companies to buy larger plots of land and then sub-divide them into smaller areas, which are then made available to general investors at a 'reasonable' price. This can be for as little as £5000 which for some small investors who are taking independent financial advice about where to invest for the future can seem a reasonable sum. However there are critics who are concerned that land banking is a bit of a scam.
What's the problem?
Any companies offering land who claim that planning permission will be granted should be avoided, unless you can confirm this with the local planning authorities. This is particularly applicable if the land for sale is in the greenbelt or is agricultural, because in each case planning permission is extremely unlikely. Equally, if the company claims that there are new roads planned, check with the Highways Authority become taking independent financial advice about land banking.
If your land gets planning permission
Unless you're going to build a property on your plot of land, you could find that in spite of planning permission, no larger developer will want to buy the land from you. Independent financial advice will show that although you have freehold ownership of the land and you can sell it at any time, you need a buyer. A developer looking at land sub-divided and owned by lots of individuals might run a mile due to the complications and costs involved in putting the purchase in place.
High risk investment
Of course not all land banking deals are a con, but taking independent financial advice will show you that they are generally considered a high risk investment. If you use the investment as part of a portfolio and don't rely on the proceeds of a profitable sale, you might be pleasantly surprised. As with any financial investment, do your research and get independent financial advice before making a commitment.
You can have a brighter financial future. If you would like independent financial advice about land banking call our experienced advisers today on 0870 803 1995 or e-mail mike.robertson@mraltd.com
