Silver Saddle Ranch

Land Banking To Wealth - Ten Principles For Success

Samuel Goodwin | March 25,2014

Land Banking, if done properly, can offer a secure and smart way to acquire low-risk high rate of return on your investment dollar. This strategy begins with adherence to the main principles of land banking, that being a strategy by which one acquires pre-developed land either in the path of growth or adjacent to a growing metropolitan area and then “banking” it in order to sell for significant profit at a date in the future.

Over time experts have identified a set of 10 key indicators that usually indicate the best opportunities for land banking:

  1. Land is reasonably level and developable, i.e. usable.
  2. Transportation by car, train, or plane is available within a 1 hour radius.
  3. Utilities to allow rapid growth are immediately available or in place.
  4. Site is located in proximity to a growing metropolitan area.
  5. Existing industrial and/or commercial base is expanding.
  6. Proximity to residential development including low cost housing.
  7. Authoritative projections for healthy population growth.
  8. Master plan for streets, roads, sewer, electric, and gas.
  9. In an area that has already been targeted for growth.
  10. In a reasonable proximity to jobs and affordable housing.

Land banking, as a long-term appreciation strategy, is for individuals who can wait at least five, or preferably 10 years, to reap the benefits of their investment. This can make land banking ideal for planning your retirement, saving for a college education, or building a legacy.

“In America more millionaires have made their fortunes through real estate than any other investment vehicle” so the truism goes. The untold side of this statement is that much of that wealth was brought about by the proper and timely use of land banking.

1. Level, usable land
Antelope Valley covers an area of roughly 3,000 square miles along the southwest side of the Mojave Desert with the San Gabriel Mountains to the south and the Tehachapi Mountains to the north. The valley is very flat with only occasional rock outcroppings and with an elevation averaging 2,350 feet above sea level the area is considered an arid high desert area. Most land in unincorporated Los Angeles County is zoned agricultural with the exception of Lake Los Angeles, Quartz Hill, Littlerock, and Llano which are zoned rural or urban residential. The ability to develop land in these areas may be subject to the zoning regulations and restrictions of the governing bodies for each. The area around California City, specifically to the north, is unique in that it has been master planned for expansion and approvals have already been recorded.

2. Transportation Availability
Antelope Valley is well served by the four cornerstones of transportation: auto, bus, rail and air.

Auto:  There are several highways and freeways: Fwy 14 and Sierra Hwy heading north-south, and Hwy 138 heading east-west.
Bus: The Antelope Valley Transit Authority, formed in 1992, connects the communities of Lancaster and Palmdale and greater Los Angeles County, with multiple bus routes covering most of the Valley. Expansion to outer areas including Tehachapi, Ridgecrest and California City are either launching or in late development stages in anticipation of the coming growth in those areas.
Rail: Metrolink, Southern California’s regional commuter rail service, provides easy connection to LA Union Station via three stations in Antelope Valley – Lancaster, Palmdale, and Acton.
Air: There are two large, commercial airports: the General William J. Fox Field and the LA/Palmdale Regional Airport. In addition, several small, private fields are available with permission.

3. Adequate utilities for massive growth
Antelope Valley is uniquely situated to provide energy for a rapidly growing population. The area is the home for several wind power projects as well as several solar power projects in various phases of development. Adequate power supply is crucial for any areas growth in this age and as the country turns more and more towards alternative energy solutions the Antelope Valley is poised to become a showcase for alternative powered community expansion.

4. Proximity to a major Population area
Lancaster and Palmdale are located in the most populous county in California, Los Angeles County, and they are within 45 miles of Los Angeles, the most populous city in California. The surrounding communities are all within 45 minutes of the Lancaster/ Palmdale metro area and as such are ideally situated to benefit from the overflow occurring there.

5. Current Industries and commercial base is growing
Existing and planned industry and commerce – The largest industry in the Antelope Valley is the aerospace industry and the largest single employer in the Valley is Edwards Air Force Base. Other important industries include retail, hospitality, heath care and social assistance, and local government.  Surrounding communities, especially California City, are seeing a steady influx of big name stores and industries who value the rapidly expanding market and relatively affordable real estate in the area.

6. Existing residential developments
Existing commercial and residential developments - Existing commercial and residential developments include numerous business parks, shopping centers, and planned communities in Lancaster and Palmdale. North of the main metro area, California City is seeing an expansion of both its commercial and residential developments with new housing and business tracts in various stages of rollout.

7. Authoritative population projections
There are two major sources for population projections and studies: the US Census Bureau and the Greater Antelope Valley Economic Alliance (GAVEA). Both studies project a healthy population growth.

 

2000 Census

2010 Census

2020 Forecast

2030 Forecast

Lancaster

118,718

168,032

215,468

259,696

Palmdale

116,670

176,506

259,712

337,314

Unincorporated-LA County

NA

95,965

133,725

167,319

Greater California City/Mojave

8385

20,847

26,561

36,755

Greater Ridgecrest

NA

34,917

37,653

39,803

Greater Rosamond

NA

23,974

27,892

33,889

Greater Tehachapi

NA

35,631

43,688

52,491

Antelope Valley Region

331,464

555,872

744,699

927,267

8. In close proximity to jobs and affordable housing
There is a strong base of working class in the California City area due to its affordability and easy commute to area industries. Along with this growth comes ever increasing infrastructure needs including retail, restaurants, medical facilities, schools and business parks. This in turn fuels more jobs, more housing and more growth.

9. In an area already targeted for growth
Antelope Valley communities are already planning for a robust economic future by aggressively attracting businesses to the area. The Antelope Valley Enterprise Zone encompasses over 61 square miles in Lancaster, Palmdale, and unincorporated Los Angeles County, and it provides multiple tax incentives for both new and existing businesses to move into the area. Among the more attractive programs is The Foreign Trade Zone which includes sites in Palmdale and Mojave where international exporters and importers can receive not only reduced duty fees but reduced labor costs as well. Again, California City and the surrounding area look to be primary beneficiaries of this growth pattern and the associated incentive programs.

10. Master plan for community (streets, roads, sewer, electric and gas)
By state law, each city and county must adopt a general plan for the physical development of all lands under its jurisdiction. This plan will serve as the basis for planning land use, transportation routes, population growth and distribution, development, open space, resource preservation and utilization, air and water quality, noise impacts, safety issues and other related physical, social and economic development factors.  Palmdale and Lancaster both have General Plans in place as does the area surrounding California City to the north.

When you can find all ten of these indicators in an area, the area is likely to continue to grow, and land values are likely to increase substantially over time.  Throughout Antelope Valley you can find areas with one or more of these indicators in place. The one area left with all ten indicators would be the area around California City, which by all indications would be the next area to look for above average growth and returns.

About Samuel Goodwin
Samuel Goodwin is an investor, author and consultant in the real estate industry for many years. Mr. Goodwin has written over two dozen papers on real estate investing, holds or has held a real estate license in 5 states and a Broker’s license in 3 states. He currently resides with his wife and youngest of three children in his ocean front home outside of Portland, Oregon.