Investing in Land

In a May 24, 2010, the Malaysia Business Times reported that:

“WALTON International Group, a Canada-based real estate investment company, is calling on Malaysian retail investors to invest in pre-development land in Jackson County, Georgia in the US.

“Its senior vice president for marketing and training in Asia, Wyman Chan, said there are 161ha for investment, divided into 1,800 units or plots and the minimum investment for each is US$10,000 (RM33,200).

“‘We have sold 100 units worth more than US$1 million (RM3.32 million) since late April, when we launched the project in Asia. Up to 30 per cent of the investors are Malaysians. We are bullish to sell the remaining units by July this year,’ Chan told Business Times.”

Read more here. And here.

A recent Associated Press report on the most recent fluxuations in the stock market painted a stark picture:

“The 348-point, or 3.2 percent, drop on the Dow was the worst day for the index since February 2009 when the market was swooning and headed toward a 12-year low. The Dow has lost 631 points, or 5.7 percent, over the last three days.”

Just days later, CBS MarketWatch noted the rise in commodities, likely in response to volatility in the stock market:

“Gold futures inched up Monday after fluctuating for most of the session, with concerns about the global recovery ultimately gaining the upper hand.”

Of course there is no commodity that has held its value longer than land.  A number of companies have been at the forefront of making an investment in raw land accessible to a broad range of investors, but increased interest is being driven by uncertainty elsewhere.

As one blogger put it, “…land investment can produce good medium to long term returns and it can be one of the safest and smartest ways of investing your money, particularly if the land is located in an up and coming area.”

Last August 1 in Financial Planning magazine, Morningstar Investment Services director of research William Harding encouraged advisors to design a different mix in their individual investors’ portfolios.  In confronting a difficult stock market, he suggested, it was time to give thought to alternative investments that, in Morningstar’s world,  “includes nontraditional asset classes such as commodities, real estate, infrastructure, private equity and venture capital”

Good advice and well in advance of what became a deeper market trough.

In Harding’s view, real estate “can include raw land, commercial real estate and residential real estate…”  And there is no better, long-term investment than raw land.  Fact on the ground have shown him to be right.

One to look at is the payout just announced by Walton International on one of its Canadian properties.  In any market, a better than 13 percent annual compound rate of return is worth notice.

It may seem an odd time to launch a blog on investing and even more so to promote that investment in land.

What with the global economic dislocation and distress buffeting markets and governments there is a flight to nothing as much as stability.  But where is that?  With the financial news in print and on television creating a-near hypnotic, minute-by-minute focus on global stock markets, there is a chance that we might miss the road signs.  LandInvesting.biz hopes to draw you attention to one, very key one.

In a review of author and Professor Niall Ferguson’s 2008 book, “The Ascent of Money: A Financial History of the World,” was this bit of insight made more urgent by the distress in the global securities markets.  “Land and the buildings on it—or in modern parlance ‘bricks and mortar’—have played a crucial part in the development of the financial (and economic) system, because ‘the land can’t run away,’ and is therefore easy to use as collateral.”

To our eye, this suggests that at a time when investors’ are making hard decisions about what to hold, what to buy and what to shed, it might be worth taking a longer look at the long-term benefit that can attach to investing in land.

Let us know what you think.