Tuesday, July 12, 2011

Land Banking with a California Land Contract

Land Banking is a term used by land investors. It essentially means to buy land and hold it for a period of time for a long term gain. It is the same as holding a stock or security for a long period of time. Simply buy land, hold and wait to see what future growth patterns do to its market value.
A land contract is a simple contract between a buyer and seller to purchase real property. It doesn’t even have to be land. It can also be known as an installment sale agreement. It is an agreement between a seller and buyer whereby the seller provides financing to sell the property for an agreed purchase price and the buyer repays the loan in monthly installments. It is much like a typical mortgage agreement, but there isn’t a financial institution involved and there are only two parties in this transaction. Under a land contract, the seller retains the legal title to the property, yet allowing the buyer to take possession of it other than legal ownership. As an example, if a buyer pays $9,000 for a parcel with 10% down payment of $900 and then finances $8200 at 7% interest approximately $228.02 in installment payments a month over 3 years. The seller is providing a short term loan to the buyer. The seller holds legal title to the land until the loan is paid in full. After the full purchase price has been paid including interest, the seller will convey title to the property to the buyer, and record the deed with the recorder's office. If the buyer defaults on their installment payments then typically the land contract would consider this a failure to pay, and the buyer would be in breach of contract. In a failure to pay any equity earned by the buyer would return to the seller. The seller would retain all of the buyer’s payments and interest.
Land contracts are different than the typical real estate contracts, because in a land contract the seller is providing a loan to the buyer (short term seller financing). In a standard real estate contract, if there is a loan then the loan is handled by the third party lender who administers the payments after escrow closes. If a third party lender is involved then a lien (mortgage) or trust deed would be recorded on the property.
This is an easy way for a buyer to limit their risk in buying land if they don’t have the full cash amount in order to buy a property. It is also more cost effective and offers security to the seller as they will not have to foreclose on the property. We are offering land contracts on our smaller parcels, so it allows land buyers to invest in real estate with less capital and risk for tomorrow’s reward. We also think banking on your future with real estate still remains one of the best means to secure your retirement, or long term needs. With today’s low bank interest rates investing in land is a far better alternative.


Friday, July 1, 2011

New Highway from Los Angeles County to San Bernardino County Would Increase Land Values on Antelope Valley’s East Side

There has been a proposal for a High Desert Corridor Highway (E 220) of approximately sixty three miles from Hwy 15 (SR-18) in San Bernardino to Palmdale Ca. (SR-14). This will greatly enhance access between the two major cities of Palmdale and Victorville, Ca. as the current thru road is Hwy 138 which is a two lane road. The High Desert Corridor Joint Power Authority (HDCJPA) is administering the project and it is currently in the environmental phase. The HDC will construct this new 60 mile east west expressway and likely a truck toll facility between Los Angeles and San Bernardino counties within the decade. The highway segment would be an eight lane freeway and it includes a High Occupancy Vehicle (HOV) lane in each direction from SR-14 past the Palmdale Airport to 50th St East along an alignment paralleling Ave P-8 in Palmdale, Ca. It may have to drop to Ave Q to pass Lake Los Angeles and reconnect to P-8 once near Palmdale. Most of the land along Ave P-8 is open space without any road access. It also looks like it will run north south along 50th street East up to Ave E and then run to Ave D (Hwy 138) west of Hwy 14. The exact details of the road route are not totally specific on the land targeted. It may still be under review while the environmental phase continues. In 2009, the Metro Board approved $500,000 for the HDCJPA to support the agency’s efforts. Measure R provided $33 million for environmental clearance. The City of Victorville received an $800,000 federal earmark which was transferred to the HDCJPA for the project. These funds will be used for the environmental clearance. The environmental clearance phase is scheduled to be completed by 2013 and construction completed by 2020. It looks like they will need additional funds for the construction phase.

An eight lane expressway will need to take a considerable amount of space along Ave P8 where land values are at there ten year lows. There are also opportunities along Ave E between Hwy 14 and 50th Street East. The project is not fully approved and technically it has not begun but buying land on the far-east side along this freeway route looks like a good long term investment in our opinion. As buying low priced land and holding it for long term investment is the essence of land banking. Even if the proposed route changes the land prices on Antelope Valley’s east side are currently very low. If you are interested in low price land opportunities then contact us for potential land banking acquisitions.