The Re-Emerging UK Real Estate Market

By Chris Westerman

Investors from emerging markets are increasingly turning to UK real estate as a reliable, long-term investment target. As the market grows crowded, however, they are taking a more granular approach to it, seeking low-leverage opportunities in supply-constrained sectors. The residential sector in particular is garnering investor attention, as demographic trends and government policies point to strong fundamentals in the short and long term. Of the many facets of the residential sector, the provision of consented land to the house-building industry offers perhaps the best opportunity.

After the fallout of 2008- 2009, UK real estate quickly became a target for emerging market investors, especially from Asia:  in recent years the market has solidified its standing as a top destination for global investors in property funds and land funds in particular.

According to the recent Global Investor Appetite Survey, published by Navarro, a UK-based global real estate law firm, 73% of the 600 investors interviewed were likely to increase their allocations into UK real estate in the next two years.

Investment is coming from all parts of the globe, but Asian investors have taken the lead since the last financial crisis. A recent feature in the Financial Times highlighted the emergence of these investors, and the surprising role of Malaysia in particular. Malaysia has emerged as a significant investor into UK real estate in recent months. The size of Malaysia’s pension funds, relative to their domestic stock and bond markets, has encouraged them to look overseas and the UK has been a primary beneficiary.

They are being joined by Brazilian pension funds, which are looking increasingly at alternative investment asset classes abroad in response to low domestic fixed-income rates. Offshore-orientated Chinese insurance funds bolstered by government policy changes, abundant liquidity and local currency appreciation are also increasingly looking offshore.

These investors are attracted to transparent‘re-emerging’ or developed markets such as the UK and in today’s global market place, wherever an investor is based, a sound investment proposition anywhere in the world is something that will be considered.

There are unique political and demographic circumstances that are driving the market in England. The UK’s population is expected to grow from 61.4 million in 2008 to 71.6 million in 2033, an increase of nearly 17%. At the same time, household density is set to fall from 2.3 to 2.15 persons per household between 2013 and 2033.

To meet this projected household growth, figures from the UK Government’s Department of Communities and Local Government suggest that 5.8 million housing completions are needed in England in the 25-year period between 2008 and 2033.

An increase of 61% over the current level of housing completions will be needed every year in that 25-year period in order to meet that additional demand. To meet this demand, several stimulus measures have been introduced including the Help To Buy Mortgage Guarantee scheme, the Help To Buy Equity Loans scheme and the Build To Let scheme. The results are already apparent, with home mortgage approvals having increased dramatically over recent months. Asset prices are also up, with house prices nationally rising 8%in the year to February 2014, and the consensus is that this trend is gaining momentum, particularly for newly built homes.

According to the Construction Register, newly built homes in the UK are more popular than ever before, while a recent survey by Halifax on house prices shows that new builds are outperforming the rest of the UK housing market, with an average value 9% above the norm.

But even as these policy measures stimulate demand, supply is nowhere close to meeting it. There is no way anytime soon that the sector will be overburdened by an oversupply of housing. All political parties in the UK appreciate the gravity of the situation. The housing shortage in the UK is so acute that there is absolute cross-party political support for the need to increase housing supply and this is unlikely to change before the end of the next Parliament in 2020.

A key problem facing the sector is a shortage of consented land for the development of new homes. This shortage remains the single biggest constraint to increasing housing supply. It is also the provider of a compelling investment opportunity. The delivery of land with planning consent provides the largest value uplift anywhere within the real estate value chain. This opportunity has not gone unnoticed by international investors. After the fallout of 2008-2009, UK real estate quickly became a target for emerging market investors, especially from Asia. They are now increasingly recognizing the specific opportunity of delivering land with planning consent.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Land Development Two-Step: Why Investors Profit By Selling to Homebuilders, Not Homebuyers

Investors are drawn to land for residential development. But they might do better completing only part of the process, selling rezoned property to homebuilders.

This is an exceptional time to develop raw land for residential and commercial use in the UK. With a growing population, a housing shortage reaching crisis proportions and recession-devalued land, all the key factors favour the investor-builder.

But if it were so easy, why do not deep-pocket investors, builders or landowners simply cash in on such a fortuitous confluence of circumstances?

The facts include that not all land is appropriately situated for residential development. Not all towns are amenable to change of use authorizations and economic growth. In many areas existing transport and other broad infrastructure cannot support new inhabitants. Not all homebuilders have the capital or stomach for carrying land through the process of acquisition, rezoning, construction and marketing. And not all investors wish to be involved in the same process.

But there are land specialists who can look at the full land-to-homes development process, even if their financial interests encompass only a portion of that. This is a relatively new approach and one that is gaining popularity among investors who look to land as an alternative investment to traditional and volatile market-traded securities. Real estate, after all, has built some of history’s greatest fortunes, in the UK as well as in countries around the globe.

The equation boils down to two factors:

Return on investment timeframe – In the traditional model, a homebuilder (and its financiers or investors) assumed all risk over the lifecycle of development. From site selection to acquisition to rezoning to construction could take as long as five years – sometimes even longer – when situations such as a deep recession make it unlikely the homes would sell. But breaking the task into two pieces – where an investor group coordinated by land experts identify optimal strategic land and achieve use changes, then sell to homebuilders to construct the properties – each player reduces the time over which their capital investment is tied up. Land investors can cut that time down to as little as 18 months.

Skill sets – It is one thing to know the market of homebuyers (what they want in kitchens, gardens and bedroom sizes) and quite something else to know how to achieve land use designation changes with local planning authorities. When an investor group can focus on the latter, and do a very good job of crunching the numbers to determine an optimal return on investment, the business of actual construction and marketing of the built properties can still be the province of homebuilders. Each of the two players can focus on what they do best.

Make no mistake, there are additional transactional costs involved in this two-part development scheme. But experienced land specialists who initiate the entire enterprise typically work with a handful of national homebuilders, establishing means of transactions that are efficient and do not necessarily involve third-party brokers.

In the best of worlds, there are no unseen variables, the spreadsheet for each project could be etched into stone and the precise profit margin could be predicted. But through the process of development, much can happen. The point is that experienced investor groups and the homebuilders will be able to minimize the risks, identify variables and have the talent to circumvent such problems as they arise. Meanwhile, each will stay on top of developments within their respective professions and industries to identify new efficiencies. It’s a formula for continuous improvement – and comes at a time when buying low and selling high is a likely scenario for all parties in the development chain.

Individual investors are now participating in land development to a degree never before seen (typically, they would have a minimum of £10,000 or more to invest). But such individuals should always consult with an independent financial advisor who can assess whether land investments are a good mix with the investor’s broader portfolio.

The Importance of Property Surveys In Joint Ventures

Joint ventures in land depend on surveys to document investment quality.

Land investments are subject to an apples-to-oranges dilemma in establishing pricing. But the industry has survey methods that investors depend upon.

All property carries some value, but the conundrum is that land and buildings are akin to snowflakes: No two are alike.

For example, Parcel A of 20 acres may carry a magnificent view of the sea and enjoy just the right amount of access from a highway. Parcel B, 20 acres situated across the road, might stretch up a steep, rocky hillside and be riddled with industrial waste from decades ago. Further, one or both parcels may not have been sold for generations, which leaves an absence of comparative numbers of then-versus-now valuations. Participants in joint ventures in strategic land investment are well advised to invest in A over B for obvious reasons.

This is why all real property undergoes property or land surveys, which help determine the market value of the asset. The outcome of a valuation is particularly important for investors who may not even physically inspect the property but who instead depend on land investment specialists to identify and manage the investment.

A property survey involves looking at a property for both its tangible characteristics as well as anything that can impact its value in the future. A “cost-“ or “summation approach” to valuation takes into account the land minus the cost of depreciation or replacement of buildings on the property.

For individuals and institutions participating in land investments and commercial property that will be rented (including those purchased in joint ventures), the “investment method” is used. This method takes into consideration the potential income stream for renting the property, as demonstrated by the rental rates of similar properties in the immediate vicinity.

A variation on the investment method is the residual method, used for properties that are raw and likely to be developed. This method requires a well-considered plan for how it will be developed, taking into account the following:

• Land value
• Development costs 
• Site preparation costs, including demolition of existing buildings, decontamination and remediation (in brownfield lands), and construction of roads and service diversions
• Fees (legal, selling agents, stamp duty land tax, options costs)
• Minimum profit requirements
• Gross development value for the completed development

Land investment consultants necessarily must provide full accounting in a prospectus document to potential joint venture participants. Potential investors should also engage the services of an independent financial advisor to determine if and when a land investment is an appropriate component of their investment portfolio.

The Growing Importance of Transparency in Capital Growth Investments

Success in capital growth investments can’t be achieved without transparency.

Scandals and fraud in financial markets and alternative investments undeniably happen. But transparent companies with smart strategies still achieve capital growth.

Institutional and private investors, including endowments of major universities, have been piqued of late because of their land investments in Africa. Many of these investments as “land grabs” according to Oxfam, the nongovernmental organization that works on global food issues. Land grabs occur when developing nations trade land for cash with buyers from Europe, the US and Asia. Private companies purchase huge swaths of agricultural property, then convert it to uses that do not benefit local populations – for example, when food crops are converted to biofuel crops.

Oxfam’s advocacy chief, Max Lawson, told The Telegraph, “We want higher standards to govern these investments to ensure that the deals are transparent and that the people on the land can give their free, prior and informed consent.” The matter is slated for the G8 group of nations meeting in 2013.

Indeed, it’s transparency that investors want as well. Individuals and institutions often wish to put their money where their conscience is, but the distance between financiers and the investment is often considerable. Agents of the investment serve as information intermediaries, therefore trust needs to be built between investors and fund managers, for example.

Another reason why transparency is top-of-mind with investors comes in the wake of scandals such as Bernie Madoff in the States, the opaque worlds of derivatives, Parmalat, Barings Bank, BRE-X and BCCI. Simply put, trust left the room but skepticism stuck around. Investors should demand to know how their money is working to make sure it fits their moral sensibilities and meets their financial objectives.

More and more, the need for transparency is becoming part of the financial services culture. One firm trading in traditional securities, Schroder UK Growth Fund, invests in what it considers “quality” UK companies. The definition they provide for quality is in three parts:

• A strong product or service
• Companies with credible management
• A sound and transparent business strategy

The emphasis on each of these, especially the importance of credible management and transparency, should be the guiding light for all investors in all types of instruments.

As a Christmas present to the world on December 24, 2012 – unexpected and perhaps not entirely appreciated – none other than Bernie Madoff wrote a letter to the American financial news station CNBC. He said the types of scandals seen in the past few years, including his own, are nothing new. The notion that insider trading is a recent phenomenon is “false,” he says. “It has been present in the market forever, but rarely been prosecuted.” In other words, someone is deciding not to share information with those on the losing side of insider trading. That’s not very transparent.

Land investments experience a bifurcated perception: Good capital growth can be achieved in well-managed, transparent strategic land investments. Yet highly publicized, fraudulent enterprises that target less sophisticated investors – often through telephone solicitations – create a much different impression. One ruse is the sale of property in far off lands: it usually exists, but offers no economic value (e.g., land located on steep hillsides).

Individuals and institutions find legitimate land investment a smart alternative to market traded securities. In anticipation of a strong housing surge – to meet a shortage in the face of a growing UK population – undeveloped property is being purchased for planning redesignations (rezoning). The price of entry in a land capital growth fund ranges between £10,000 and £25,000 investment.

Instead of offers to buy land in Turkey or Belize or Morocco, investors are advised to look for properties in the South and East of England, where population growth is strong.

Any kind of alternative investment requires close study. For a full analysis of risk, as well to learn how certain investments fit within your portfolio, speak with a personal financial advisor.

Sustainable Development in Rural Areas is the Intent of the National Planning Policy Framework (NPPF)

Greenbelt lands are thought to be sacrosanct in resisting development. But that’s not the absolute rule – the NPPF encourages vitalization of rural areas.

The growing UK population brings up much debate over development in greenbelt lands. This is not just about adding residential and commercial tracts – even a proposed new poultry farm near Bath met council resistance in 2013.

In that particular planning consent application, the proposed agricultural-purpose enterprise and structures were deemed likely to “result in an unacceptable degree of harm to the landscape and to the openness of the Green Belt…the dwelling constitutes inappropriate development,” said a report in the Bath Chronicle.

And yet, there is growing support by voices in the government and the general population saying that the greenbelt is not sacred and that some development will be necessary to accommodate a growing UK population.

The current situation is the worst housing crisis since the post-War period, placing families stacked two or more generations into flats and bungalows, as homebuilders have not found economic incentive to build since the 2008 financial crisis. The country is focused on finding solutions, some of which can come from the build-rural recommendations of the National Planning Policy Framework (published March 2012). Those recommendations include the following:

• Planning policies should support economic growth in rural areas in order to create jobs and prosperity by taking a positive approach to sustainable new development.

• Support the sustainable growth and expansion of all types of business and enterprise in rural areas, both through conversion of existing buildings and well designed new buildings. 

• Promote the development and diversification of agricultural and other land-based rural businesses. 

• Support sustainable rural tourism and leisure developments that benefit businesses in rural areas, communities and visitors, and which respect the character of the countryside. 

• In rural areas, exercising the duty to cooperate with neighboring authorities, local planning authorities should be responsive to local circumstances and plan housing development to reflect local needs, particularly for affordable housing, including through rural exception sites where appropriate. 

• Planning policies and decisions should not attempt to impose architectural styles or particular tastes and they should not stifle innovation, originality or initiative through unsubstantiated requirements to conform to certain development forms or styles. It is, however, proper to seek to promote or reinforce local distinctiveness. 

• Planning policies and decisions should address the connections between people and places and the integration of new development into the natural, built and historic environment.

In an earlier document, “Planning Policy Statement 7: Sustainable Development in Rural Areas,” by the Office of the Deputy Prime Minister (Crown Copyright 2004), these points were also made:

• Focus most development in, or next to, existing towns and villages.
• Discourage the development of “greenfield” land, but, where such land must be used, ensure it isn’t used wastefully.
• Promoting a range of uses to maximise the potential benefits of the countryside fringing urban areas.

What should be clear is that development in greenbelt and agricultural areas is far from discouraged. Instead, national planners prefer that it be done consciously.

Strategic land investors are looking at brownfield as well as greenfield land as opportunities to serve the critical housing needs of the country. Generally speaking, the residential and commercial building they foster follows the presence of employment in a local economy, where having the right kinds of workers living nearby the business itself will do better.

Investors looking for capital growth and who consider such areas for development are advised to work with land specialists who understand the processes and priorities of local planning authorities. For the new investor, participation in such schemes needs independent review by a qualified financial advisor.

Strategic Land Investments Can Be Smart - or Rife with "Red Flag" Problems

What are the “red flag” problems to look for in potential strategic land investments?

A sucker is born every minute. But some of the scams in land investments are so obvious that the would-be investor taken in by them must be a sucker without web access.

In the 1980s an American company called Lunar Embassy embarked on its scheme to sell one-acre plots of land on the moon for approximately $20US per acre. Simply put, it was a strategic land investment scam that is out of this world. The company reportedly still thrives, legally, through Internet sales, claiming 2.5 million acres sold – despite the fact the United Nations prohibited states and individuals from owning extra-terrestrial property since 1967.

That noted, contemporary land investments on Earth can be just as dodgy and have been happening since long before human space travel. Perhaps this is due to the fact that great wealth has been built on fortuitous investments in undeveloped land (the 2012 movie “The Descendants,” starring George Clooney, uses as a demonstrative sub-text the great fortunes connected to ideally-situated, once-remote property). Or, it may have to do with the idea of hidden treasure. The best example might be the Oak Island Money Pit, a Nova Scotia (Canadian Maritimes) tourist attraction that has repeatedly drawn investors to buy and attempt to excavate sinkhole land in search of fabled treasures. The deep hole on Oak Island has yet to yield treasures but myth and tourism keep the dream alive.

These ventures into space and fantasy are relatively harmless compared to land scams that target unsophisticated investors. Operating within legal limits, many land banking companies use telephone marketing techniques to contact potential investors with offers that sound too good to be true – because in fact they are. The characteristics of these modern day rip-offs include the following:

• Land in a remote location, unlikely to be visited by the potential investor. Quite often the countries for these once-in-a-lifetime opportunities are Brazil, Cayman Islands, Costa Rica, Cyprus, Indonesia, Turkey or Ukraine.

• The land is truly in the UK (but will not likely ever be developed). In fact there is land that is well situated near population centres where development might seem logical. Except it may be on protected greenbelt tracts, or on a steep hillside or otherwise inaccessible to roads, rendering it highly unlikely to be developed.

• The land has explosive value-increase potential. The pitch is that planning permission is already guaranteed making it likely the underused farmland is about to become a five-star resort (often the pitch for sunny, seaside properties), or for a about-to-be-valuable agricultural crop (acai or cocoanut plantations in Brazil, or biofuel land in Indonesia, for examples). The investor has to ask, “if it’s such a good deal why are they offering it to anyone who answers a telephone?”

• The product being sold is exotic and exists only on paper. Sometimes land is just too simple for scammers and their prey, so instead worthless paper is created to sell carbon credits, diamond rights or options thereof. Sales people will assure their targets that the contracts are honoured by the “International Court,” as if such a thing exists.

• The investment will come with a 100 per cent or 1,000 per cent or greater “guaranteed return.” Who would possibly be so stupid as to turn it down? Other than the person who asks, “Why is anyone not simply hoarding this investment for his or her own gain?”

In fact, legitimate land investments are available, providing excellent capital growth for investors, in the UK. But such investments require very strategic approaches made by seasoned land investment professionals. Typically, a solid land investment will require a minimum of £10,000 and make no specific promise on the ultimate return on that investment (which would violate standard financial industry ethics). Before getting involved in any kind of investment, the investor is wise to discuss it with a personal financial planner who can provide an independent evaluation.

Like All Investments, Land Development Has Inherent Challenges

Yes, there are things that can go wrong for land investors. But experienced land specialists understand risks and mitigate them as best they can.

In the years following the financial meltdown of 2008, many traditionally attractive investments have failed to perform for the financial community. Market-traded securities have recovered somewhat, but the volatility has left many investors instead turning to real asset alternatives, such as hedge funds, commodities, precious metals, art and antiques, and real estate, either in real estate investment trusts (REITs) or raw land.

Each type of investment has its pros and cons, of course. But with alternatives to market-traded securities (which most consider to include REITs), there is at least some control that the investor can assume or approximate. The art lover, for example, can work with a schooled buyer who understands that market and where it may be headed. The same might be said for vintage car collectors, or those who invest in built properties such as office or retail real estate.

Investors in raw land - those involved in development - take on their own set of risks and rewards. For the most part, strategic land investing has historically performed well for some of the richest individuals of modern history. But there remain challenges that seasoned land investment specialists know to at least look for. These include the following:

New regulations - The Community Investment Levy (CIL) was made effective in 2010, a tariff scheme on developers to draw funds to improve local infrastructure that is presumably stressed by the introduction of new residences or businesses built by the developer. Funds are used for schools, hospitals, parks, leisure centres, transport and flood defence. While local planning authorities historically would try to draw this money from developers on a case-by-case basis, the national CIL rules at least make this a much more predictable expense.

Planning authority and community resistance - Not every person in every community favours development. A land developer should have a general sense of this going into an investment (before an acquisition is made), but there always is the possibility that a charismatic and influential community member can mount a campaign against development.

Physical, historic or toxic barriers - Sometimes, problematic geologic features of a property might turn up in construction. If archaeological findings are uncovered, it may delay or prohibit development altogether (depending on its importance and non-transportability). With brownfield sites, the presence of industrial toxins is always a worry. On occasion, war ordinance or illegally-dumped chemicals might be found in dangerous quantities and consequently require expensive soil remediation.

Lack of transport or other necessary infrastructure - If a land development adds 100 or more homes to an area, it is essential that existing roads, sewers and school systems be able to support it. It is up to the local planning authority to make this determination – and impose the CIL to the extent necessary to cover infrastructure improvement costs – however much of this should be determined in advance of acquiring land for development.

All this considered, a very important factor looms over the UK and drives a greater sense of urgency at overcoming these and other development barriers. That factor is population. From 2001 to 2011, the UK grew by 7%, an astounding number given the declines in population elsewhere in the Eurozone. This comes after three decades of underdevelopment – where more than 200,000 new homes should be built every year, yet less than half of that in fact are. The crush of population needing homes speaks to a serious degree of pent-up demand, one that will drive development for decades to come.

Individuals who wish to invest in development can do so by working with experienced land developers. But given the risk profile of land, such investors would be wise to speak first with a financial advisor who can objectively evaluate that risk and factor it in with the risk-reward equation elsewhere in one’s personal financial profile.

Is “Ready to Build” Land Available to Meet the UK’s Critical Supply-Demand Housing Equation?

As land investors and homebuilders have split their tasks in the development process, it may actually speed up housing construction. To be sure, the opportunity exists.

By the close of the first quarter 2013, housing prices in London were higher than their 2007 peak, reports the Nationwide Building Society. So does that mean the rising tide will buoy all boats? How will this increasing demand impact development on “ready to build” land in the UK?

To be sure, there remains a great deal of uncertainty about the British and Eurozone economies, as well as questions about how the government is acting to restore growth. Many argue the move to austerity by the coalition Cameron government is holding back the entire economy – and yet the Bank of England’s Funding for Lending Scheme is being credited for helping move things along – as intended.

Fixed mortgage rates as of late March 2013 were as low as 2.78 per cent on five-year deals, says HSBC.

Each of these factors intersect with the country’s housing crisis, of course. A reported 7 per cent growth in the British population between 2001 and 2011 went unmatched by building, particularly after the financial crisis of 2008. The factors stunting housing development include lending stringency and an inability for homebuyers to accumulate a sufficient deposit.

This pent-up demand fosters a clear business opportunity for land investors and building developers. While in the past, these functions were one and the same, a split has allowed one group to acquire sites that are appropriate for development, while homebuilders then buy those sites from the investors – in tracts or lot by lot – to develop into actual homes.

This bifurcation in the development process makes sense, enabling specialists to focus on what they do best. For example, the land investor must identify sites that will work optimally in the supply-demand equation of housing in the UK. Typically working with an investor group headed by strategic land development specialists, the investor must first study economic factors of a town or borough to determine where demand will be in three to five years. They consider what land is available for purchase at a price that fits the business model; this includes achieving a zoning change, where necessary, from the local planning authorities. From there, the infrastructure is designed and built to accommodate the needs of the anticipated buyers.

The homebuilder then acquires the land on which to develop market-appropriate properties. A trend in the recession has been to shift to rental housing, providing what is most in demand even while residents cannot get financing to purchase their homes.

The task, then, for the investor is to identify where those demand factors are strongest, after which they will build the infrastructure – streets and utilities – to accommodate those needs in the near future. “Ready to build” largely depends on how far along in this process a developer may be. As investors find more incentive to get involved in land development, the supply-demand curve might reach a point where housing is affordable again.

Investors in land should identify the risks of this type of real asset investment relative to the allocation of other assets in their portfolio. Consult with an independent financial advisor to discuss where you think raw land might be an opportunity.