Land banking loans

Land banking involves buying and holding vacant land or property with the aim of selling it for a profit in the future.

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Making money from a plot of undeveloped land appeals to many investors, but it requires patience. You can potentially double or triple your money if you're prepared to hold on and wait for the price of the property to appreciate. To see that return on your investment, a land banking loan might be where you can start. Find out what's available.

Business lenders you can compare

Name Product Min. Loan Amount Max. Loan Amount Loan Term Upfront Fee Filter Values
Swoop Finance Business Loan
$1,000
$100,000,000
1 to 20 years
Depending on your loan contract
Apply online and borrow between $1,000 and $100,000,000. Options for good and bad credit borrowers.
Zip Business Loan
$10,000
$500,000
Up to 5 years
No establishment fee
Borrow up to $500,000 with loan terms of up to 5 years. Flexible weekly, fortnightly and monthly repayment options available with no early repayment fees.
Lumi Unsecured Business Loan
$5,000
$300,000
3 months to 3 years
2.5% establishment fee
Apply for up to $300,000 from Lumi and benefit from short loan terms, no early repayment fees and once approved receive your funds in just one business day.
ebroker Business Loan
$5,000
$5,000,000
1 month to 30 years
$0 application fee
Small business loans available between $5,000 and $5,000,000. Get access to 70+ non-bank lenders on this independent platform.
Valiant Finance Business Loan Broker
$5,000
$1,000,000
3 months to 5 years
$0 application fee
A Business Lending Specialist from Valiant Finance can give you access to competitive business loans from over 70 lenders. Loans between $5,000 and $1 million are available. Request a call – your loan can be funded in 1 business day.
Moula Business Loan
$5,000
$250,000
1 to 2 years
2% Establishment fee
A loan of up to $250,000 that can be approved and funded within 24 hours. Available to businesses with 6+ months operating history and $5,000+ monthly sales.
Max Funding Unsecured Business Loan
$3,000
$30,000
1 month to 1 year
$0 application fee
An unsecured business loan from $3,000 that offers convenient pre-approval and no early repayment fees.
OnDeck Business Loans
$10,000
$250,000
6 months to 2 years
3% of loan amount
Apply for up to $250,000 and receive your approved funds in one business day. Minimum annual turnover of $100,000 and 1 year of trading history required.
Prospa Business Loan
$5,000
$300,000
3 months to 3 years
3% origination fee
Small business loans are available from $5,000 - $300,000 on terms of up to 3 years. At least six months trading history and a monthly turnover from $6,000 is necessary.
ANZ Unsecured Business Loan
$10,000
$1,000,000
Up to 15 years
$600
Apply for a loan from $10,000 with no security required and benefit from flexible repayment terms.
Octet Trade Finance
$100,000
$10,000,000
1 month to 2 years
Transaction fee 2.5%
Access a line of credit to pay suppliers in over 65 countries. Borrow from $200,000 up to $7 million.
ANZ Secured Business Loan
$10,000
$10,000,000
Up to 15 years
$600
Benefit from a low rate when you secure this loan with property and/or business assets. Loans from $10,000 available.
Westpac Business Loan
$20,000
$3,000,000
1 to 30 years
$0 application fee
Purchase a new vehicle, equipment or support your cash flow with a business finance solution from Westpac.
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What is land banking?

Land banking refers to the practice of purchasing land based on its potential for future sale or development. If you engage in land banking as an investor, you will typically purchase a property and hold onto it until the price of the property appreciates. Then you can sell it for a profit – this might involve waiting until market conditions are favourable.

How does land banking work?

Land banking typically involves:

  1. Acquiring the title to vacant properties or properties that show potential for profit;
  2. Making necessary payments to make the property ready for redevelopment;
  3. Holding onto the property or increasing its value by improving infrastructure and;
  4. Transferring ownership to the new owners once the price appreciates.

It is worth noting that the above won't always happen – a decrease in real estate values means some investments will result in a loss.

What kind of loans can you take for purchasing land banks?

  • Development and construction loans.
    If you're looking to construct a commercial property, sub-division or residence on your land, these loans let you repay once you complete and sell the development property.
  • Commercial property loans.
    Banks and financial institutions offer commercial property loans to help you finance various real estate investments, from vacant land to abandoned properties.
  • Land sub-division finance.
    Builders and contractors often sub-divide properties into industrial units, small sub-divisions, spec homes, multi-family units and so on to meet property requirements. These loans typically cover the cost of the land, the engineering and infrastructure works and refinancing the completed project.
  • Mezzanine loans.
    If you have insufficient financing from a bank loan, mezzanine financing can help cover additional development costs. These loans aren't offered by traditional banks and tend to come with higher interest rates, although a better interest rate may be available if you use the property as security.
  • Rural property loans.
    These loans are ideal for builders who purchase rural property to sell as hobby farms or residential homes.
  • Agricultural land bank loans.
    Not all developers engage in land banking for urban development. You can also invest in tracts of undeveloped land that is ideal for agricultural purposes, which can be financed with an agricultural land bank loan.

Land banking promotes development and helps meet real estate demand. However, risk is involved, so it pays to compare your loan options before investing.

FAQs investors have on land banking

What are the merits of land banking as an investment strategy?

Investing in real estate has been a profitable activity for many people. You could potentially:

  • Gain profits from purchasing property that will appreciate with time
  • Earn premium rates by selling the land to property developers after securing development approval from the local council
  • Hold your properties until market conditions become favourable.

What are the essential features of a property that has good development potential?

If you're interest in land banking, knowing the key features of a good real estate opportunity is essential. A tract of land suitable for land banking will:

  • Be level or usable
  • Be near a growing metropolitan city
  • Have a master plan that features streets, roads and pipelines for sewers, electricity, water, and communications services
  • Have an abundant water supply
  • Be conveniently located or easy to reach by road, rail and air
  • Have various utilities for fostering growth nearby such as educational institutions, hospitals, industries and so on

When should you consider taking out a land bank loan?

If you have a property, you might need a land bank loan:

  • When you require development approvals
  • In case of insufficient pre-sales
  • If you need to make amendments to your development application
  • If you plan to amalgamate with another site and,
  • If you your property requires rezoning.

Ready to get started in land banking? Jump back up and compare your options >>


DISCLAIMER: The comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information applicability to their own particular circumstances.

Picture: Shutterstock

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