Nearly two months before the dramatic losses in the equity/commodity markets during October 2008, the Department of Labor issued a number of statements in the Federal Register regarding employee’s diversification of holdings, such as: “…Other lapses in diversification may involve omission from portfolios of asset classes such as…real estate…investors sometimes fail to diversify adequately.29 Inadequate diversification….recently cost participants perhaps $42 billion annually, the Department estimates.30…”

The Department of Labor further stated in their report: “Investors sometimes fail to diversify adequately and thereby assume uncompensated risk and suffer associated losses…” a recurring theme that repeats itself during every equity/commodity market downturn. Crestmont Research notes that “…the compounded average annual change in the stock market is near 5% over the past century…”, that “…Investors only can spend compounded returns, not average returns…” and furthermore that, “…investors from today will never achieve the long-term average return. Not in ten years, twenty years, fifty years, or even the almost eighty years that represent the most recognized long-term average return…”

Most financial advisors, CPA’s, attorney’s, and certified financial planners are all familiar with acquiring large parcels of undivided pre-development land to accumulate wealth over time. The familiar term is landbanking. For centuries, it has been an effective tool for the wealthy to buy/hold/sell very large tracts of land in the path of growth, but up until the last decade was out of reach of the average person.

There are other forms of landbanking, such as acquiring smaller lots of divided land, or entering into joint ownership of a large parcel of land that is already subdivided and sold to numerous owners to be landbanked. The problem with this type of landbanking is it is not attractive to developers.

Strategic LandBanking is different from traditional landbanking (or Land Banking). It is the purchase of very large tracts of undivided pre-development land (30 -100 acres) located in the path of a medium sized city’s growth. It is also located as part of a diversified regional economy and close to utility and government provided services. As the population and industry grows outward, then developers and municipalities buy these lands to build commercial, residential or government properties to accommodate urban sprawl.

Today’s economic climate has created an unusual opportunity to use Strategic LandBanking to maximize future appreciation and accumulate future wealth.

Strategic LandBanking provides individuals who have moderate levels of income, cash on hand, 1031 exchanges, 401-K Rollovers or who have Self-Directed Retirement Plans/IRA’s the opportunity to participate in ownership interest in this type of property. Strategic LandBanking can augment, balance and diversify retirement planning strategies. Reasonable financing is also available to purchase outside of rollovers, IRA’s or 1031 exchanges.

Most Strategic LandBank projects are in the western US and predominately within California. Although California is the 3rd largest US state in total acreage, it only has 18% of all its land available to its total commercial, industrial and housing needs and its future projected growth is 1.6 times the US national growth rate. (The remaining 82% of California’s total land is wild, State, or Federal land.)

Make sure your choice in a Strategic LandBanking company has experience utilizing proprietary data mining and analysis to assess large tracts of available pre-development land for their Strategic LandBank portfolios. Also that its current portfolio of California land has been reviewed by the California Department of Real Estate (DRE) and has a Public Report of its portfolio compliance to the State of California’s DRE requirements.

Financial planning experts have always encouraged diversifying asset allocations in retirement and financial planning, not just diversification in stocks, bonds, and commodities but also to include real estate. Today’s volatile equity and commodity markets provide an even more opportunistic period to use Strategic LandBanking to balance retirement and financial portfolios. More money can be printed, more stock certificates can be issued, more bonds can be issued, but there is no more land.

For more information on Strategic LandBanking, visit http://landbanknation.com

If you are a Licensed Real Estate Agent/Broker, CPA, Enrolled Agent, CFP, Licensed Insurance Broker, Registered Investment Advisor, General Contractor or Attorney you may visit URL http://www.landbanknation.com/affiliate/index.php to learn more about becoming a member of the Strategic LandBanking Affiliate Network.

This article is not a solicitation to sell LandBank interests, but rather is informational.

References:

“The Simple Truth About Western Land Investment”– by Leland Frederick Cooley

“Pay Dirt” — by Darren K. Proulx, CEO of Land Resource Investments, Inc.

29CFR Parts 2550, U.S. DEPARTMENT OF LABOR, Employee Benefits Security, Administration Federal Register / Vol. 73, No. 164 pages 49904/49905:
“Inadequate Diversification…. Investors sometimes fail to diversify adequately and thereby assume uncompensated risk and suffer associated losses…Relative to full diversification,25 employer stock investments recently cost DC plan participants perhaps $3 billion 26 annually, the Department estimates.27 Other lapses in diversification may involve omission from portfolios of asset classes such as…real estate… investors sometimes fail to diversify adequately.29 Inadequate diversification….recently cost plan participants perhaps $42 billion annually, the Department estimates.30”

National Endowment for Financial Education (NEFE) website, Ways to manage money and keys to financial planning:
“ … Tax-Advantaged Retirement Accounts…”:
“…To make it easier for you to grow your retirement nest egg, the federal government enables you to put your retirement investments into certain accounts that have tax advantages…”
…”Investment Vehicles…Investments are usually made in assets such as stocks, bonds, real estate…”
“…Stocks give you ownership in part of a company…Stocks can be risky… affected by outside factors, such as political and market events…”
“…Real estate investments include…raw land…an attractive investment to many people…your investment is tangible…”

“Crestmont Research, http://www.CrestmontResearch.com”:

Significant Swings
Although the compounded average annual change in the stock market is near 5% over the past century, the range of dispersion in annual returns is dramatic…More than50% of the years ended with changes in the index exceeding +/-16%, either less than -16% or greater than +16%

Distorted Averages
Investors only can spend compounded returns, not average returns.

It’s Not The Economy
Despite the general contention that the economy and the stock market are inexorably connected, the facts get in the way of confirming common wisdom…stock market returns are driven primarily by a cycle in the P/E ratio (see the Secular Cycles chart…

Waiting For Average
…Yet, from today, what length of time is needed to assure the long-term average return? NEVER—investors from today will never achieve the long-term average return. Not in ten years, twenty years, fifty years, or even the almost eighty years that represent the most recognized long-term average return.

Destitute At 80: Retiring In Secular Cycles
There has never been a thirty-year period for the stock market when investors have lost money; yet there have quite a few thirty-year periods that have bankrupted senior citizens who were relying upon their stock portfolios for retirement income.