Real Estate Investor Magazine South Africa December - January 2014 | Page 66

STRATEGIES

Plots Of Land

BY SCOTT PICKEN

The most affordable way to invest offshore

I

never thought I would invest in land, as it doesn’t
earn an income. I have seen those opportunities
in the UK where I am buying land, and then
sitting, hoping and praying that in seven years they
get planning permission and they can sell the land
to a developer. If they don’t, I own a small portion
of a farm.
However, as an investor you need to stay up-todate with the latest trends which are occurring in
the international markets. In the USA, the market
is recovering fast and in Atlanta specifically, the
property prices have risen 16% for the last year
and 24% in the bedroom communities where IPS
and Wealth Migrate have been investing. The big
funds like KKR, Colony Capital and Blackstone
have aggressively come into the residential property
market in the USA and invested billions of dollars,
effectively turning a mom-and-pop industry into a
financial instrument. Blackstone alone have bought
34 000 homes in 12 months in six cities in the US
and their credit rating was just upgraded by Fitch
and Standard & Poore to A/A+. This credit rating is
the highest of any alternative asset manager and one
of the highest of any financial institution.
Due to this, there is far more demand in the
trophy residential markets than there is supply,
driving prices up dramatically of their low base
caused by the Global Financial Crisis.
We have to adapt
In February this year, while on the IPS/Wealth
Migrate USA Buyers Trip 3, Scott, Brendon and
Hennie, Founders of Wealth Migrate, investigated
the land opportunity to understand it better .

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Before the crash, developers subdivided and
developed master plan communities, built the club
houses and amenities and even finished building
many of the houses. Then the market turned rapidly
and the developers were brought to their knees by
lack of available finance, effectively bankrupting
many of them. The incredible thing is that the
music stopped almost instantly, creating a unique
situation where developments went under at various
stages of completion. Some just land. Some were
land that had been rezoned. Some communities
that were rezoned, roads cut and infrastructure
laid. Some even further, where incomplete houses
stood on fully developed land. Then, a unique
opportunity was created where some of these
developments were half built out with houses,
roads, amenities like tennis courts and clubhouses.
Unfortunately for the banks, they had no idea what
to do with these various developments in various
stages of completion.
It’s quite obvious that the low hanging fruit is
being picked at a rapid pace in the fast recovering
US market – single family homes and condos at
incredible discounts, but these are becoming few
and far between.
What’s the next low hanging fruit level? Even
though it would cost on average between $25 000
and $50 000 per stand to buy the land, rezone it, put
in all the services, roads, etc, these stands (or ‘’lots’’,
as they are called in the USA) have been sitting on
the market for as low as $2000 each.
As prices rose, the gap between new builds and
existing houses was reducing and so builders started
coming back into the market. Savvy investors

December January 2013/4 SA Real Estate Investor

started to realise the opportunity and the inherent
value in the fully serviced land.
Wealth Migrate went aggressively into the
market and let all their ‘bird-dogs’ go and find
opportunities for them. To find the best deals,
they reviewed 142 different developments and
communities and whittled it down to five.
Their goal is to land bank at least 1000 of these
developed stands in the best areas with most
growth potential in the next year and they’ve
already bought over 200.
Their criteria are important, where they want
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