How To Identify High-Growth Regions for Land Investments

So you want to take a vacation to some place new and exciting. I’ll bet you’ll spend quite a bit of time researching the area: where to stay, where to eat, how to get around, what’s going on in the area. Would you spend the same amount of time investigating an investment opportunity that could provide you with a comfortable retirement years down the road?
The key – well, one key anyway – to successful pre-developed land investing is identifying high growth areas before the growth arrives. As discussed in Money Doesn’t Grow on Trees, this land banking strategy is known as being in the path of growth.
But this is a big country, with a lot of open land. How do you know where the path of growth is? Of course you can never know with 100% certainty, but there are a series of fundamental characteristics you should look for in any land banking area. These are the qualities that keep the growth moving down a path toward your land.

1. Population centers. The best place to start looking for growth is, quite simply, where the people are now. These are dense population centers that, in order to keep growing, need to expand beyond their current boundaries.
2. Affordable housing. When people can’t afford to buy a home inside the population center they move to the more affordable outskirts. Ideally you’d like to find an outlying area with housing prices roughly half of average housing costs closer in.
3. Level, usable land. This is the land that gets developed first. Hilly, mountainous terrain, or land with other natural barriers to building, is usually the last to be developed, if at all.
4. Available water supply. It’s been said that water is the oil of the 21st century. You need water to support a growing population and, if it’s not there, the people won’t be either.
5. Transportation accessibility: freeway, train, air. Look for existing transportation infrastructure and serious plans for expansion. You may find a good deal in the middle of nowhere, and your great grandchildren will thank you for it.
6. Adequate utilities. In addition to water a growing population needs electricity, gas, telephones, cable, etc. The cost of developing this infrastructure is tremendous so utility companies forecast their budgets well into the future.
7. Educational system. New growth is generally led by families, and families won’t go where they can’t educate their children. Look for well supported primary education system as well as advanced education and training opportunities. Also, look for plans to build new schools over the next 5 to 10 years.
8. Proximity to large, metropolitan areas. New population centers don’t just spring up in the desert. (Las Vegas aside.) They radiate out from existing metropolitan areas. Ideally you should be within commuting distance – say 100 miles or so.
9. Existing and planned industrial and commercial base. Jobs. Jobs attract people, simple as that.
10. Existing and planned residential and commercial development. In real estate we say that retail follows rooftops. Builders won’t go into an area unless their research tells them there is demand.
11. Master plans for community. While we live in a free economy, it is ultimately the local government agencies that decide what will be built, when and where. Most communities are required to have a master plan for growth looking out at least ten to twenty years.
12. Authoritative population projections. There are actually people who spend their lives studying population growth. They’re called demographers and you can find their work at the census bureau, which provides population and economic data on the state and local levels as well. In addition, many local government agencies and economic associations produce well researched growth projections.

These are the principal characteristics to consider in land banking. If a region is missing the mark on a number of these points I would put it in the “not in my lifetime” category. Making sure these fundamentals are in place will definitely help you get into the right ballpark. A closer look at the actual stadium (i.e., which land parcels to consider) will be addressed in our next land banking discussion.