Undeveloped Land in High Demand

September 12, 2012

Investors have a new target in real estate: undeveloped land. They're snatching up undeveloped land heavily discounted in bankruptcy proceedings from developers and banks that foreclosed on the builders once they ran out of money for their projects, Reuters reports. 

The investors then resell the land for up to 20 percent or more returns on their investment. Or, in a buy-and-hold strategy, the investors partner with homebuilders to develop the land. 

"We are coming out of the mother of all housing cycles, and residential land is the best way to play the ultimate recovery," Michael Barr, a Paulson & Co. portfolio manager, told Reuters. "Land is the highest-returning component of the homebuilding equation."

Investors find the most attractive land to buy is a parcel that already has all the planning permissions in place to start construction. Otherwise, the approval process for building on the land from local and state agencies can be costly and timely. 

Source: “Investors Cash-in on Land Deals as U.S. Housing Picks Up,” Reuters (Sept. 10, 2012)

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