Famous American author, Mark Twain was quoted as saying: ‘Buy land, they’re not making anymore.’ “Those who have taken this to heart and followed the advice will know that while possibly said partly in jest, the statement rings true and is sound investment advice for those wanting a cornerstone for creating wealth and long term financial growth,” says James Bowling, CEO of Monarch & Co, a company that specialises in investor and immigration programmes around the world.
The global recession post 2008 hit property markets the world over, which saw the value of real estate plummeting across the board, with land and residential property markets possibly suffering the most. What followed post-recession was an oversupply of housing along with a lack of financing options available to consumers, which meant that in some countries the price of property dropped by as much as 80%. With an oversupply of property on the market, the need for new properties diminished and became a far less financially viable option.
According to Bowling, the housing market began to see signs of recovery from around 2011 with property investors gaining confidence in the market and returning. He notes that those who had access to finance were able to capitalise on the low property prices and high rental yields. “The return of the property investors breathed new life in to an otherwise flat market. The oversupply soon corrected itself and the market changed from a predominantly buyer-focused market to a seller’s market,” says Bowling. “With sales increasing and the oversupply of property corrected, developers have resumed building new properties, which has once again resulted in demand for plots and land on which to build.”
He notes that development of property throughout the globe has rapidly increased over the past two years, particularly in countries such as the US. “Although the growing demand for land has caused an increase in the land value, it is still not selling at the same price it was during the height of the property boom. However, as the building trend continues and finance becomes more readily available, more and more buyers will enter the market, while the parcels of land available for purchase will diminish. As this happens, the price of land will continue to increase and will offer investors a significant return on their investment,” says Bowling.
According to Bowling, property experts have earmarked certain dynamic, growing communities within the US, where investing in land with planning permission offers great returns for short, medium and long term financial strategies. “One of the areas that have been targeted by property experts is South West Florida, which currently has dramatically under-priced land plots available, while demand in the area is growing due to economic growth. Prices of land in the area start from around $9 990, which makes it an affordable, perfect investment opportunity for those looking for a hassle-free investment with the potential to offer significant returns,” says Bowling.
He adds that investing in residential land is extremely straightforward, in that an investor simply needs to purchase the land at the lowest possible price and then wait for capital appreciation over time. Another advantage of purchasing land is that there are no running costs.
“If the investor purchases a plot for $9 990 today and then sells for $20 000 in five years time, they would have seen a full 100% gross return on their investment. Monarch&Co is able to gain access to parcels of land that are in some cases discounted by over 80% off their peak values and at prices that would normally be reserved for large scale investors. Essentially this means that we can offer buyers a distinct investment advantage as well as the potential for excellent returns when they sell,” says Bowling.
The investment strategy, according to Bowling, is investing in land at 20% of its peak value (seen in 2006), investing in areas that are seeing rapid population growth due to positive underlying economic factors, where the supply of plots is finite and where a return of 50% of the peak price is achievable within a three to five year time frame.
Bowling notes that while buying land may be a good investment option, it is important for investors to steer clear of buying ‘raw plots’, and rather stick to fully developed plots that have planning permissions for residential construction, as this makes them far more desirable to potential buyers and developers.
The plots in Florida where Monarch&Co are currently offering investment opportunities are ones where development and connection to public utilities can start quickly and easily. Bowling notes that the areas situated in the Fort Myers metropolitan hub of Southwest Florida, is a prime example of where investors will find the right kind of plots. Land in this area remains undervalued despite recent increases in demand. Bowling says that large corporates such as Hertz are moving their base of operations to the area over the next two years, which will increase the number of jobs available and demand for land needed to accommodate the influx of employees. He adds that another prime investment location is on Florida’s beautiful Gulf Coast. Although a large percentage of the land here has already been developed, around 35% of residential land is still available to investors.
According to Bowling, the process of purchasing a plot of land in the US is a simple six step process that involves selecting a plot, signing and returning a purchase agreement, transferring funds to US title companies escrow account, receiving a closing pack, signing and returning it, preparing and issuing title insurance. Once this is done the plot is recorded and the transfer title hard copy is sent to the investor.
“Purchasing land in Southwest Florida offers investors the chance to realise returns beyond that of ordinary investments. We expect that within three to five years, land prices and property prices in the South West Florida area will have recovered to 50% of their 2006 peak values. This means that in this time frame, investors could be realising as much as 100% return on their investment, or 20% annualised, with little or no running costs. This is an opportunity to make the most of the property market recovery and join the ranks of many who have created wealth through property investment,” Bowling concludes.