Would Alternative Investments Be a Good Long-Term (10+ Years) Strategy?

Should a 10-year investment strategy incorporate alternative investments?

Alternative investments that might include art, classic cars, rare diamonds or raw land have performed well in the past decade. Can the asset growth continue?

The performance losses of hedge funds in 2012 set off warning bells for many investors as they look for smart investments in 2013 and beyond. As Reuters reported in July 2012, “performance losses at many funds resulted in total industry assets shrinking.” The financial news agency quotes Hedge Fund Research, which noted the average fund dropped by 2.7 per cent in the second quarter of that year alone, a time marked by net outflows in the billions from all types of funds. Some analysts attribute this to the sheer proliferation of hedge funds, reducing their vaunted performances earlier in the nineties.

All investing involves risks and rewards, ideally in commensurate quantities. As traditional market traded securities have proved volatile and ultimately disappointing since the financial crisis of the past several years, many people have turned to alternative investments. These include hedge funds, but can include art, fine wine, classic cars and precious metals, as well as real estate and land investments, among others. Most of these have performed well against the stock market – but will they in the decade to come?

Of course, the owner of the crystal ball that holds the answer would ultimately be the richest person on earth. Lacking that, the best we can do is to look at the history of alternative investments and factors that may favour or diminish their prospects in the years to come:

• Wine – Bordeaux reds tracked by the Liv-ex Fine Wine Investables Index between 1999 and 2009 found a 138 per cent return on such vintages as Lafite Rothschild 1982. Of that variety, 12 bottles purchased for £2,613 in 2000 sold nine years later for £25,500. In other words, pick your wines wisely and you can do extremely well.

• Art and jewellery “passion” – Fine art requires an expert, as with virtually all investing, to predict which artists may perform well over time. They can prove to be spectacularly wrong: Mega-selling artist Damien Hirst, whose provocative use of dead animals and even a human skull (encrusted with diamonds) has earned him US$350 million in his relatively short career thus far,  saw some of his earlier work plummet in price by 30 per cent in 2012. Yet, London-based Emotional Assets, which promotes itself as the “convergence between collecting and investing,” is part of a category known as “passion funds,” which claim returns that best investments in stocks and bonds. KPR Capital, a Cayman Islands investment firm launched a rare diamonds fund that returns between 15 and 17 per cent per annum in 2007 and 2008.

• Classic cars – The largest classic car auctioneer in the UK, Coys, says the value of cars  – including the brands Ferrari, Mercedes Benz, Porsche and Aston Martin – has gone up since 2000 by as much as 200 per cent. That said, a firm spokesman told The Guardian that a Jaguar XJ220 that sold for £120,000 has not increased in value at all, and a Ferrari Daytona sold in 2008 for £190,000 was worth £30,000 less in 2009. Again, expertise on the part of a buyer or a buyer’s consultant is advised when looking at this type of investment.

• Raw land – Land that is poised to be rezoned – typically, from agricultural or commercial purposes to residential – offers the most likely upswing in value. Because the characteristics of land are so variable, it is difficult to cite broad investment returns from one location to another. But advice and management of the investment by seasoned property fund managers are more likely to yield a favourable return. The 7 per cent growth rate of the UK population over the past ten years while housing stock did not increase commensurately all suggest that land investments should perform well for the foreseeable future.

The characteristics of best performers in almost all alternative investments include a finite supply, attractiveness to foreign investors from developing countries (China, in particular) or increasing natural demand (e.g., the increasing UK population needing housing).

No investment should be undertaken without the counsel of a personal financial advisor.

What Incentives Do UK Housing Investors Get From the Government?

Lending schemes from the government might be helping buyers, but the real way to increase housing stock might lie in programmes that grow rental inventory. 

The Guardian columnist Matt Cavanagh wrote an article in 2012 criticising the Chicken Littles of Britain who worry population growth is out of control and leading the country to ruin. “Should we see a rise in our population as a problem, or an opportunity?” he asks. “Are we simply ‘too crowded’ to cope with more immigration?” he continues, before proceeding to provide his own data and opinions that refute the worriers.

Cavanagh concludes that UK population growth has been decried for the past 100 years, and that with smart planning, lots of building and technological innovation – already underway – those problems can be mitigated.

Part of the writer’s argument is that England is not static, that the country has historically done well as it adapts to change. Also, that the land mass can support a larger population quite handily. One such change already underway is the shift from an ownership to a renter society, as illustrated by how things have changed in the past ten years. A decade ago new housing included about 10 per cent of inventory for rental; today, that number is closer to 17 per cent, and it’s projected to rise to 20 per cent within the next decade.

HM Treasury, the government’s economic and finance ministry, issued a report in 2010 (“Investment in the UK Private Rented Sector”) that acknowledged a plethora of factors favour increasing the country’s stock of rental housing to ease the burden of a housing undersupply. These factors include macroeconomic stability, meeting peoples’ housing aspirations, creating sustainable communities and establishing labour market flexibility. By increasing to-let housing, the country will get more affordable homes overall.

Since then the government has created two programs to encourage investors (such as those who seek UK joint venture land opportunities) to put money into both social and private housing development. One, a scheme for affordable housing with debt guarantees, enables the raising of debt with government backing. This effectively makes it possible to build more new rental homes because borrowing costs are lower. For building in the private rented sector, investors are also given similar debt raising support with the same expected outcome of additional building.

The Royal Institution of Chartered Surveyors (RICS) is proposing some new ideas as well to goose the rental housing market. In a report released in June 2013, RICS recommends new tax bands for higher-value properties, and it suggests providing incentives for pensioners to downsize to smaller homes. RICS was critical of much ballyhooed government schemes that help homebuyers, arguing that those are most beneficial to people who could afford to buy anyway; until there is an increase in he housing supply, millions will continue to be shut out of buying altogether.

Instead, RICS proposes releasing public lands for more residential development, which could accommodate building up to 250,000 new homes in the next few years. Another proposal is that developers be required to build within three years of receiving planning consent. Also, RICS proposes a scheme to enable lower-income renters to accumulate a “portable home ownership discount” over time that would ultimately enable them to buy their homes.

RICS also suggests that self-invested pensions (“Sipps”) could be directed to investments in new-build residential property.

Cavanagh, the Guardian columnist, acknowledges that population growth will require not just housing but investments in infrastructure and public services. But he doesn’t read these as insurmountable problems. Rather, it would take the creativity of ideas such as those provided by RICS to figure out solutions to these concerns.

Investors in the housing market – be it for-let or for sale – are advised to keep current on such lending schemes and the direction of policymakers on the local and national level. When determining to invest in strategic land or real estate, such as with capital growth investments (in a Sipps programme, for example), the advice of a personal financial consultant should be enlisted to ensure a good balance of risk within an overall wealth development plan.

What Requirements Does the Code for Sustainable Homes Place on Green Buildings?

Developers are taking on larger costs in order to build green. Fortunately, there is a market for residential property that has a lesser impact on the environment.

In 2010, the UK government set out to reduce carbon dioxide emissions by 20%, a disproportionate amount of which (30%) comes from housing. Part of the impetus for reducing the carbon footprint of residential dwellings is that the aging UK housing stock compares poorly to that of other European countries – with energy-hog buildings that disproportionately add CO2 to the atmosphere.

In response to this, new homes being built and older homes being retrofitted are certainly trending to green, energy-efficient standards. That is, energy and other resource efficiency is becoming the norm in residential structures (not to mention commercial and other large-scale education and healthcare buildings). This says a lot about the degree of interest in building greener and achieving a generally more sustainable world.

How applying various green standards might affect the dearth of housing in the U.K. – where the country is building about 100,000 fewer homes each year than are required – is a different question.

For those who can afford it, a green home is what they want. By the statistics released in March 2013, approximately 280,000 homes that are either built or are in the design stages have achieved Code for Sustainable Homes’ “Standard Assessment Procedure” certification. This measures the environmental performance of a home and has become the national standard for design and construction of sustainable new homes, in particular.

Measurements under the code result in a ratings of zero to six stars, the larger number being the most optimal. Homebuyers are now looking at this star system as a means of evaluating the home’s value. The criteria by which the system is based are the following:

• Energy use and CO2 emissions – For each star ratings level a minimum number must be reached.

• Water use/savings – Considering both interior (household) and exterior (garden and car washing) use.

• Material sourcing (minimizing impact of resource use and waste) – That which is required to construct the home should be made of recycled materials and locally sourced where possible.

• Surface water run-off and mitigation of flood risk – Measuring how a building might contribute to floods, use water-capture methods and materials where possible.

• Waste reduction – Building or property features that enable recycling and composting; also, reduction in construction material waste.

• Use of insulation and efficient heating systems to mitigate environmental impact – Minimisation of pollution that would otherwise result from inefficient heating systems.

• Contributions to occupant health and wellbeing – The comfortable home should have good daylight access, provide for private spaces, offer good sound insulation, and be accessible and adaptable.

• Impact on and protection of the local ecology – Specifically, how well the home integrates with the local environment, minimizing its impact on land features, flora and fauna.

This Code is one of many measurement systems and benchmarks that the country and its building industry have used over the past several decades (building regulations calling for tighter building envelopes have been in place and increasingly stringent since the 1960s). But it can impact the resale value, as buyers can look at the star ratings as a means of comparing one home to others.

One of the larger drawbacks of the Code for Sustainable Homes is how all costs are borne by developers. This then becomes a question of whether environmental standards will fly in the marketplace, where a sustainable home will clearly cost more to build and which then must by valued sufficiently by the home buyer.

In the midst of a housing shortage, affordability remains an important matter. But the crush of demand calls for homes at varying price points. Those involved in alternative investments such as real estate are increasingly choosing to work with specialists who convert raw land to housing that is built on strategically purchasing property that is well-suited for use designation changes. With permission from local planning authorities, the land can then receive infrastructure additions that homebuilders need. But any land investment – whether done independent or with UK property fund partners – remains a calculated risk, one that an individual investor should discuss with an independent financial planner.

Might the Answer to the UK Housing Shortage Be Found on Disused Farms?

Relaxed rules on the conversion of farm buildings and other structures to alternative uses illustrate a trend: the UK is open to adaptation and change.

The increased productivity of farms in the United Kingdom has worked its way into national planning policies in a surprising way. Beginning in May 2013, existing agricultural buildings that measure less than 500 square metres can now be utilised for other purposes with a “light touch” neighbour consultation.

This means that farm outbuildings and homes might adapt quickly to serve as retail, financial services, office, leisure, assembly, restaurant, pub and hot food takeaway businesses. According to Communities Secretary Eric Pickles, this can have a positive impact on rural economies. “There is huge untapped potential in many disused existing buildings,” he told a website serving academics and professionals engaged in urban development. “We’re determined that every one of them is put to good use. By simplifying the process and relaxing some stringent rules we can provide a helping hand to those eager to boost their high streets or rural communities by cutting the time and costs needed to start up new businesses.”

In some of those communities, conversions to free schools might be accomplished as well. The programme also includes disused office buildings, which can also be converted to residences.

Why is this happening – and how might it address the country’s serious housing shortage?

It is largely due to the increased efficiencies in farming over the past several decades. Wheat yield as measured in tonnes per hectare rose from about six to eight from 1980 to 1995, for example. Yields have come about through more intensive use of fertilizer, increased use of pesticides, greater knowledge and expertise in farming, removal of hedges that enable more efficient farming, and European Union guaranteed pricing. Over this same period of time, the proportion of UK workers engaged in farming declined from 175 per 1,000 workers to about 100, a 42 percent reduction. With fewer people needed to work the land, it’s understandable that there has been so much consolidation of farms and the abandonment of farm buildings that go with that.

The conversion of farm buildings to pubs and office buildings to residences speaks to a generalised effort overall to open up building and land to alternative uses that fit a changing world. The UK population grew by 7 per cent between 2001 and 2011, an astonishing rate of growth in comparison to most countries in the Eurozone. This is due to a combination of immigration, higher birth rates and senior longevity. This last factor, seniors living longer, includes them remaining in their own homes longer, which contributes to the housing shortage. The National Planning Policy Framework (NPPF) has advised that more local authority be allowed to drive decisions on how land is used, in part to speed up the process of conversions of property and buildings from a former use to something more appropriate for contemporary needs.

Strategic land investing is also an attractive investment opportunity when those conversions can be made. Specialists in conversion schemes – property fund partners who purchase disused farms, for example, that can contribute more to the local economy by conversion to residential use – will work with investors to identify appropriate sites, achieve a zoning change, and build the infrastructure necessary to enable homebuilders to build and sell residences. In some areas, those may be rental homes and in others homes for purchase.

Investors interested in any such land or building conversions need to go about it carefully, of course. Real estate is a means by which many have achieved significant asset growth, but it should be done in balance with other financial assets and growth strategies. An independent financial advisor should be enlisted to make an assessment of this type of capital growth fund.

Green Belt Versus Brownfield Land Development

Does land development in the UK boil down to green belt versus brownfields?

The national housing crisis in the UK is blamed by many on restrictions to green belt development. The solutions, however, may be worked out through localism.

There is much debate in the United Kingdom over different solutions for the housing shortage. One part of the argument has to do with the dearth of financing available to both builder-developers and potential homebuyers (although the government is dealing with this latter point through schemes such as Help-To-Buy). Another part has to do with government directives on where to build: in green belt areas or on brownfield land.

The UK green belt policies reach back to the 1930s, when political leaders adopted a policy to prevent suburban sprawl. These policies effectively kept a ring of forests, agriculture and undeveloped land around many of the towns of England, Wales, Scotland and Northern Ireland.

But the total population of the country has changed dramatically in the eight decades since, as have a host of economic factors. Not only has industry and population expansion created evermore-dense towns, but a housing crisis has developed due to an unfortunate confluence of factors in the past decade: immigration, a higher birth rate, seniors living longer, and the recession.

Total population growth in England and Wales has been at about 7 percent the past decade, adding more than 3.7 million people since the turn of the century. But the financial crisis of 2008 and the resultant recession have been consequential as well. Banks are reluctant to loan money to developers, just as they have not been lending to homebuyers. New home building is at the lowest rate, as a portion of population, in 100 years. Meanwhile, multiple generations of families are sharing housing while they wait for conditions to change – specifically, for more homes to be built.

So the question in broad brush drills down to this: when the economy recovers, where will home building happen?

Directives to build brown – and the problems that presents

PDLs, (Previously Developed Land) in the towns, offer an alternative to green belt building. Also called “brownfield” sites, this is where land is vacant or occupied by vacant and decrepit buildings, or perhaps zoned for commercial and industrial purposes but sitting empty – seemingly providing opportunities to build. This is land that is contained within the green belt rings, closer to town centres and on the grid of existing utilities. These conditions make it easy to develop property, and would provide a vital, urban lifestyle to residents – and consistency with the green belt ideals of the 20th century, right?

Around the year 2000 a government commission led by acclaimed architect, Lord Richard Rogers strongly encouraged building new housing on brownfield lands, in part as a strategy to avoid green belt development. The commission acknowledged that 3.8 million new homes would be needed by 2012.

Builder & Engineer magazine weighed in on the topic more recently and they aren’t in complete agreement with that approach. The publication cites how building over the past decade has been at 160,000 to 200,000 new homes per year (and less in 2012, with a reported 21,540 new starts in the second quarter, which would annualise at about 86,000 units). Why so slow? They cite the observations of Richard Simmons, who is managing director of the Construction Centre and also a property developer.

“I think it is because brownfield is pretty slow to come to market by the time you’ve done all the testing,” says Simmons. “You have to spend a lot of money first assessing the site. Firstly you have the desktop study where they look for what contaminants are in the ground and their assessment reveals whether remediation is needed or not, which can be expensive. As a developer you are always thinking that there might be the cost of evaluating a site that might go wrong, so it’s not as easy as building on a farmer’s field.”

Not all brownfield land is contaminated, counters the British Property Foundation. A spokesman for the organisation explained that the broader definition of brownfield is PDL, which simply means it was built upon in the past. “Green building isn’t necessarily plush green land,” the spokesperson told Builder & Engineer. “It can often be nasty and derelict.”

The green belt solution?

The Daily Telegraph published an opinion piece in August 2012 largely in support of green belt preservation. It cites Housing Minister Grant Shapps’ stated support for development outside of green belt lands. Still, the newspaper acknowledges the importance of housing and the mixed picture created by the Localism Act of 2011:

“Protecting the green belt is not easy: it is in the nature of economically vibrant towns to sprawl into the countryside, and only the green belt stands in the way. Moreover, the Government’s support for the green belt can clash with its commitment to localism, as many local authorities want to build on it or causally redraw its boundaries.”

The media watchdog group FullFact.org took its own look at the scenario in September 2012 and finds a more mixed view. The group critically examined claims by the Campaign to Protect Rural England, CPRE, which are that brownfield land in England was sufficient for the construction of 1.5 million new residences.

But a closer look at the available land found something much less, says FullFact.org. Overall, there are 61,920 hectares of brownfield land in the UK, as compared to 1.6 million hectares of green belt property. A little more than half – 54 percent – of the brownfield sites are vacant or hold derelict buildings. Only the remaining 46 percent, approximately 30,000 hectares, of brownfields are truly available for repurposing and building without displacing a current occupant. This does not distinguish the portion of those brownfields that are truly appropriate and feasible for housing: many are contaminated with industrial waste, while others are situated in industrial corridors, where it would be difficult to attract residents to live.

For all of us, including those involved in UK land investment as well as those looking at investing in real assets, it may ultimately prove to be an argument that offers no national solution, as housing needs and philosophies about green belt vs. brownfield land may differ from town to town. Which in the end may be the ultimate benefit of the Localism Act.

Avoid UK Land Investment Scams

Land investment scams in the UK are on the increase – but can be avoided.

There are valid opportunities to invest in land in the UK, primarily because of accumulating demand for housing. But shady operators are selling worthless property.

A great irony of the Internet era is that access to information should make us better informed and therefore smarter and able to make optimal decisions. But the success of scams such as Internet Nigerian bank swindles and corrupt land investment schemes prove this not to be the case.

The latter of these two – land banking investments – is fuelled by the known increase in demand for housing in the UK. With a swelling population and a pronounced housing shortage, it makes perfect sense that investment in UK land will pay handsome dividends. But the undeveloped land that will be most valuable is that which is most likely to be rezoned appropriately and is situated where population growth is most pronounced.

The Financial Services Authority warns against land scams, which are characterised by the following:

Aggressive selling – The adage that “anything that sounds too good to be true probably is” applies to land banking schemes. It begins with the schemers contacting potential clients. These are “cold calls,” where you have no existing relationship with the company. The pitch is straightforward and exciting: There’s a land rush about to happen, so anyone who can buy undeveloped land will make handsome returns on their investments. Some victims of land banking schemes were told they should expect a 100 to 130 percent return. If such an investment could do well, they would not be offering it to anyone but themselves.

Instead, the individual investor who truly is interested in land investment should speak with a qualified financial advisor.

Inappropriate or ineligible tracts – The fact of the matter is that most land banking schemes do involve actual land that the investors will own, providing them with legal title. The problem is the land is virtually worthless – even if located in nice places.

How does that work? The land parcels may be tiny, perhaps located in an environmentally protected green belt area, unlikely to ever be zoned for development. Some have no road access or they may be situated on steeply sloping hillsides. Some brownfield properties are sold, but are so contaminated by previous industrial use that they would require unaffordable clean up measures to bring them into compliance with environmental laws. The land schemers purchase these lands for a very low price, then subdivide and sell them to unsuspecting would-be investors.

If you are interested in a land investment, do your own investigating. Again, a trusted third party financial advisor can steer you to qualified land investment firms that has a track record of legitimate dealing and a proven rate of return on investments.

Continued requests for additional money – One trick of land banking frauds is that they lure investors with small down payments of £500, more or less. The money makes the victim feel invested, and they will continue to pay into the property fund over time. This is all that the operation wants to do, which is to create a flow of income (many such operations are based in other countries, where wire transfers are simple to execute).

Legitimate alternative investment programmes in land typically require between £10,000 and £25,000 at a minimum for participation. You would identify qualified, professional land investment firms through a qualified personal financial advisor.

The Implications of Institutional Investors in Rented UK Housing

Institutional investors now back in UK residential rental housing: What does it mean?

Investors such as Prudential are now buying to-let residential housing in England. After decades of absence, the housing crisis seems to be the driver.

The quadrupling in the size of the private rented housing market in the UK over the past decade reached a watershed moment in 2013: institutional investors are now getting back into quality rental housing ownership. Prudential PLC ended a 30-year absence from investing its assets in the sector with the purchase of 500 newly constructed homes, promising to increase its portfolio there in the future.

Since the 1970s and 1980s, individual landlords with small portfolios largely dominated the landscape in private to-let housing. Indeed, the National Landlords Association says that a growing proportion of private landlords – currently, 73 per cent – rent only at market-rate, not to recipients of local housing allowances. Some of this can be attributed to the strength of the rental market, as more working people can afford to pay rent but are unable to buy their residences.

The introduction of the 1988 Housing Act changed the scenario for private landlords, as they were enabled to charge market rates for housing. About two-thirds of residential rental properties are held in small (one or more units) portfolios owned by individuals. The remaining one-third is held by companies that, for the most part, are real estate firms.

But the long-term cash flows of rental property look increasingly attractive to institutions with money to invest. Analysts note that residential compares well to commercial properties, where deep-pocketed investors have been concentrating their assets in recent decades. Additionally, development of raw land sometimes focuses on the rental market already, where the market demands it. Residential properties beat commercial in both total returns and risk adjusted returns, in addition to outperforming equity and gilt markets. The total annual return for to-let residential investments is 9.78 per cent (vs. 5 per cent for commercial), according to analyst M&G Real Estate (formerly known as PRUPIM).

One attractive aspect of the residential rental market is that it is more inelastic to economic downturns than with commercial. In an economic trough, commercial spaces empty as businesses shrink or close, but housing is more resilient as even unemployed people find ways to stay in their homes if at all possible. Elsewhere in the Eurozone – Switzerland and Germany in particular – a robust institutional rental market has always been healthy.

But perhaps the biggest driver in the UK rental market is a simple acceptance that ownership is beyond the reach of much of the country’s burgeoning population. With 7 per cent growth over the past decade (Census 2011), the country’s homebuilders are only constructing half as many homes as needed. The tight supply, as well as stringent lending and unattainable deposit requirements, have made renting the only rational option.

Strategic land partnerships and homebuilders are responding to this shift by building for to-let owners. Indeed, land development specialists who assemble investors (often operating as capital growth partners) are now speaking to local planning authorities about the rental option. Where employers need people living nearby, rental housing may be the answer – particularly if workers need to be flexible to moving. With companies such as Prudential entering the market, competition for good properties may heat up.

Interested investors in any type of housing need to go about it with due caution. Many choose to invest via land investment funds that are managed by a strong team of strategic land investment advisors. Speak with an independent financial advisor to examine where land and property investing fits into your overall portfolio risk profile.

Understanding Joint Venture Investments

There are many advantages to joint venture investments, including how the partners can bring experts together with a pool of investors.

Joint venture investments are vitally important to many types of enterprises: For new or revitalising companies, in technological research, and to businesses that work across national borders (where the joint venture partners bring financing and local expertise together). Joint ventures in real estate are a special category because of the nature of land development.

To the individual investor, a joint venture investment in land provides several advantages. A lone investor would bear all the risks – and rewards – of real estate development. But this can be too large an exposure for many individual land investors. The advantage of a joint venture investment in land is that individual investors can participate in larger acquisitions with better knowledge, expert management and economies of scale.

The nature of land investing raises many questions. Is it ripe for development? Are there barriers to development, such as local zoning or economic uncertainty? What are the opportunities that are not readily apparent to investors who are geographically removed from a particular parcel? In a joint real estate venture, appropriate expertise and analytical tools can help to answer these questions.

In a recovering economy, land located in favourable regions, counties and countries offers promise for capital growth through development as well as from market forces. Joint venture investors have already begun to seize the opportunity.

Property Fund Partners and their Role in Land Investment

The investor looking to take advantage of real estate opportunities is wise to find property fund partners to manage his or her risk.

The uncertainties and risks associated with all investments – publicly traded stocks and bonds as well as alternative investments such as hedge funds and real assets (real estate, for example) – require all investors to work with trusted and competent advisors. Nowhere is this more important than when investing in land. Variability between real estate choices compels the investor in most instances to work with property fund partners who know how to mitigate risk and maximise returns. These partners will work with its own in-house team of experts as well as strategic partners across the market.

The confident lone investor may be someone with an education and career experience in land and land development. But the vast majority of investors choose to work through a diversified portfolio fund, where the smart acquisition and management of multiple parcels of property limit their exposure. The fund or funds they select are only as strong as the expertise and skills of the land fund managers.

It is those skills that enable the property fund partners to succeed for their client-fund participants. They identify where the maximum asset returns can be found and what optimal external factors are present. Externalities include local development and planning schemes, trends within a local economy and competing properties in the district. Fund managers also assemble a portfolio of properties with a variety of characteristics that will take advantage of a variety of market conditions – again, to mitigate exposure.

Add to this the fact that investors have their own set of tax strategies that can be affected by land investing and it's clear that property fund partners play a vital role in creating a holistically profitable asset for the investor.

Choosing Capital Growth Partners

People with deep knowledge about alternative investments (land, hedge funds and so on) are capital growth partners to investors.

The goal of almost all investment is capital growth. This is as true in the publicly traded stock and bond markets as it is in alternative investments (hedge funds, real estate investment trusts, foreign exchanged funds, private equity and the like).

But because most investors are themselves not intimately familiar with the businesses and real assets they invest in, they largely depend on investment advisors to find investments that are well managed. Advisors and managers are, by definition, capital growth partners with investors, as they match funds with appropriate and productive assets. Land investment advisors typically have an expert team in-house, but also it also work with a select group of strategic partners to deliver the best return on its investments.

A capital growth partner in strategic land development provides a good example of how this works. Land is a finite asset, which set against a growing population – in countries and regions where the population or commercial uses of land are increasing – generally means that the land will increase in value. And yet there are many unknowns about individual tracts of land: how is it currently zoned, and what are the chances the parcel or parcels are ripe for development? What other factors, such as new employers entering the area, might drive up demand for property? Are there environmental issues with the land that make it unsuitable or prohibitively costly for development? These are critical questions that a real estate advisor to a capital growth partner should be able to answer.