5 Strategies for Starting Your Land Investment Journey Without a Large Savings Account

Whether you are employed or running a business, you don’t need to wait until you have accumulated enough savings to get started on the land investment journey. Since land has an exponential appreciation in value, you are better off diving into real estate as soon as possible. Consider the following strategies to help you realize your land ownership dream.

1.   Get a Bank Loan

As land is a reliable investment option, getting started is often easier said than done. Firstly, the cost of land with a higher return on investment is usually high. Therefore, many potential investors are turning to banks to assist them in getting started in land investment. Fortunately, banks are often looking to make money and are likely to finance your land-buying effort.

Since a bank is offering you money to invest in land, they will seek to verify your ability to repay the loan. You have a better chance of getting cleared if you are employed. However, you can still obtain credit when you are self-employed and prove that your cash flow is adequate to cater to the repayment program. Your credit history will also inform the bank on whether to offer you a loan or not.

Usually, a bank will also seek to ascertain the land owner you wish to buy from. However, it is rare for a bank to support land purchases from individuals and only deal with real estate companies.

Finally, your bank will conduct a land valuation on the property to avoid overvaluing it. After that, they will advance you the money to acquire the land. However, you will only receive the title under your name upon clearing the loan.

2.   Personal Savings

For many low-income earners who cannot access credit, their savings is mostly used to buy land. The upside of saving your money is that you won’t have to shoulder the extra cost of interest that is required for other credit options.

There are different ways of saving money, with pros and cons. Generally, bank deposits are secure, and your money can earn interest while sitting in the bank. You can also consider other options like money market funds and government bonds that have a longer maturity period and earn more interest.

3.   Land Investment through a Sacco

A Sacco provides unemployed and self-employed individuals affordable credit that attracts low-interest rates. Typically, you have to make regular contributions for a period. After several months, the Sacco will advance a loan at least three times your savings.

Some lenders, like Stima Sacco, offer loans tailored for acquiring assets like Makazi Poa loan and Plot Financing loan. Moreover, other institutions will advance you short-term credit for developing the property.

While Saccos provide an excellent source of credit for people who would not qualify for bank loans, you are better off doing your homework. For starters, ensure that your Sacco of choice is regulated by the Sacco Societies Regulatory Authority.

Another factor to consider is your network within that Sacco. Most Saccos require you to present up to four guarantors as a form of security for a loan that exceeds your savings. Also, like a bank loan, you must present collateral like a logbook in place of guarantors.

4.   Joint Ventures

A joint venture (JV) is decidedly the best option for owning land if you don’t want the trouble of seeking credit. Additionally, a JV has a shorter turnaround than saving up for several years since you can acquire property before its value reaches unattainable levels.

A JV is an arrangement where two or more people pool their resources to acquire land and assets or start a business. Therefore, you could partner with a trusted acquaintance and contribute money and expertise towards financing your land investment.

One crucial benefit of a JV is that the partnership can raise adequate seed capital without needing credit. Nevertheless, the association can similarly acquire credit based on its seed capital and leverage the creditworthiness of one or both partners to access favorable loan terms.

Like any business, a JV arrangement has to follow due process before investing in land. Therefore, a JV agreement must be drafted to outline any scenario that might lead to infighting. This document will also stipulate the structure, obligations, rights, and allocation formula of the investment. Finally, all the parties involved in the JV must accept and sign the agreement.

5.   Rent-To-Own Plan

A key benefit of land investment ventures is that you don’t need to have the total amount required to own a property. In the case of rent-to-own schemes, you can get started as a tenant, and your regular contributions will go towards acquiring the property.

First, you must identify a real estate company offering this arrangement alongside your desired property. After that, you should hire a relevant advocate to help you understand the terms that will facilitate property transfer to your name.

Usually, you will be required to pay rent for a period while residing in the property. Furthermore, your monthly contribution will be slightly higher than the market rate, with the balance being used to clear the purchase price. Once the agreed period elapses, the previous owner will transfer the title to your name.

From the start, this plan will cost you more in the long run. However, it is a preferred option for those starting the real estate investment journey. Additionally, you can acquire property in an exclusive neighborhood where prevailing land prices are high.

The Takeaway

While these strategies are popular among prospective investors with limited capital, they are not the only ones. Also, consider seller financing and moratorium on loans. In the former, you must deposit a lower amount to the seller’s account and clear the remaining amount in installments over an agreed period.

In the case of a moratorium, your bank can furnish you with a grace period while you continue developing the property. During that time, you won’t be required to contribute towards repaying the property development loan.

Generally, land investment is a surefire way to acquire wealth. Additionally, you can start this journey even if you haven’t raised the required capital to purchase a property.