Have you ever stopped to think what the presidents that were chosen to grace our currency have in common – I mean, besides the obvious (all being “dead presidents” – now a popular street slang for cash)? Those presidents were some of the most affluent men in their time – all of whom became wealthy as land bankers. Land banking is not simply the ownership of land, however. Land banking, as an alternative retirement strategy, requires research and strategic planning. But that’s not as daunting a task as it sounds. All you really have to do is study history – which we all know repeats itself – especially in the development of land where there is a natural tendency for a tremendous increase in value when certain key indicators for appreciation exist.

Have you seen the infomercials with a paid celebrity spokesperson excitedly promoting ownership of a piece of “prime” California land? Granted these locations could be a nice place to build a cabin for the occasional getaway, or a retirement spot or even a vacation rental property. But these locations are most definitely NOT an example of land banking. There is no anticipated growth in population and therefore no anticipated sizable increase in land value. One of California’s most successful land banking companies, Ace Capital Group, having been in the business for 40+ years, has taught me that there are 10 Key Indicators required to be considered a viable land banking asset. They are:

Master plan for streets, roads, sewer, electric and gas (“Pre-Developed”)
Studies projecting healthy population growth
Existing commercial and residential development
Current industries growing, more planned
Close to an ever-expanding metro area.
Pre-school to university all nearby
Utilities in place for huge growth
Easy to reach by car, train or plane
Abundant water supply
Level, usable land

Additionally, when researching future land value, one should consider the 3 phases in the development of land. The first or early phase is “Undeveloped’ – when land can be bought very inexpensively but can also cost too much to have utilities put in to make it usable. The second or growth phase is “Pre-Developed” – during which the land sees most of its appreciation. It is in this phase that you want to acquire the property. Lastly, there is the mature or “Developed” phase. By this time, it’s too late to acquire the property if you’re looking at it from the standpoint of an asset for appreciation value.

Here is a great example of the principles of land banking: 30 years ago, my friend’s father purchased their family home from the builder of a new planned community during pre-construction (which is not to be confused with pre-development). He paid $ 60,000 for the home and the lot located in Orange County, California. Today, that home could be worth $ 600,000 – $ 750,000 – which is 10 – 15 times the original purchase price. Not bad for a 30 year investment. But how much better would my friend’s dad have done, if he had taken that same $ 60,000 and purchased 5 acres of pre-developed land (which equals $ 12,000 per acre) just 3 – 5 miles away? Today, that same land is easily worth $ 1 – $ 2 Million per acre! That’s a whopping 83 to 167 times the original price! Now, THAT’S land banking!

Keeping the above indicators in mind, let’s now narrow our search down to a particular state. Common sense would dictate that it would have to be a state with a large economy and that expects a large migration of residents in the next several years. Also, the state should be in line with the biggest trends in commerce and industry, such as clean and green energy. Lastly, this state should have some of the most valuable land in the nation already. Yes, I’m biased, and my vote goes to… California, of course!

Let’s look at the numbers:

California’s population grows by one new Sacramento every 240 days
California has the largest state population in the U.S. (38 Million in 2008) and growing!
California consists of 82% protected wild land; there was only 18% available to farm or develop.
Of that 18%, 10% is already developed, leaving only 8% available to farm or develop.
California is the Renewable Energy Capital of America, being the only state with plants being built to research and develop Solar PV, Biomass, Geothermal, CPS (Natural Gas and Electric), Wind and Hydropower energy sources

My final installment will narrow the location down to a specific 3000 square mile area that is poised for tremendous population, housing and employment growth in the next 30 years! I will pinpoint exactly where all indications show that the above statistics will take effect most dramatically to virtually guarantee a sizable increase in land’s value.