Land Banking Investment – All You Need to Know Before Investing
Do You Want to To Double, Treble Or Multiply Your Money?
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Land Banking Investment Can Potentially Double, Treble Or Multiply Your Money In The Few Years?
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“Don’t Wait to Buy Land. Buy Land and Wait.” – Will Rogers
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Without any doubt, Land Banking Investment have become very popular today.
Who do not want to invest in undeveloped land, in a city or rural area, which is currently used for agriculture, landscape design, or just left to nature, in a foreign country with the potential to double, treble or multiply your money in the few years?
This investment is traditionally only reserved for the super rich; as they are the only ones who can afford to buy hundreds of acres of land parcels that cost a couple of millions of dollars(often $1 Million plus)).
However this has changed in the past several years, through a clever and unique joint venture program, Land Banking Investment is now available to within the reach of almost all smaller-scale investors.
Now a great number of companies like Walton International Group, Land International, Strategic Land Investment, UK Land International, Profitable Plots, Edgeworth Properties, TSI International etc, have opened up this investment to reach a wider audience.
Before you Invest any Money in the Land Banking Investment, please do careful study, researching and DO NOT be Blind by the potential(double, treble or multiply your money ) of high returns.
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Land Banking Real Estate Investment In Plain English
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In Land Banking Investment, you are a Silent(Sleeping) Partner i,e a business partner who provides capital but does not actively participate in the management of operations.
NEVER Ever entirely rely or believe 100% on what the person marketing the land banking proposition tells you. They are a commission sales person and got quota to reached.
What is Good for them may NOT be Good for your Pocket!
Do Read ALL my Blog posts and the valuable reader comments on Land Banking Investment before taking the plunge!
You may click on the Link below:
Land Banking: Secret Recipes to Wealth? (MUST read Advantages and Disadvantages of Investing in Land Banking-What “they” prefer Not to Tell You in details)
Land Banking-Central Bank of Malaysia Raids Walton International Property Group (M) Sdn Bhd!
Land banking is A Scam?
I hope you can make informed and wise decision then!
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4 Steps to Profit in Land Banking Real Estate Investment
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Read this article extract from MoneySENSE.
MoneySENSE is a national financial education programme launched by Mr. Lee Hsien Loong, then Deputy Prime Minister and Chairman of the MAS on 16 October 2003.
MoneySENSE brings together industry and public sector initiatives to enhance the basic financial literacy of consumers.
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Introducing Walton International Group – Land Banking
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Land banking – Look Before You Leap
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Received an offer to invest in undeveloped land in a foreign country, with the potential to double, treble or multiply your money in a few years?
Attractive as this may sound, consider carefully before you part with your money. Even if you are presented with financial reports showing the possibility of consistent and high returns for the investment, or testimonials of how other investors have benefited from land banking, take a step back and consider what the risks are. This is critical.
After all, where there is an opportunity for you to make some money, there is always a chance that you can lose some or all of your money. There is no free lunch. In the case of land banking, you may have seen media reports about investors losing money in land banking schemes in various countries. Some schemes have also turned out to be scams!
This article explains what land banking is, highlights the key risks and important questions you should consider before deciding whether to place your money in a land banking proposition.
1) What is land banking?
Land banking is the practice of purchasing undeveloped land with the intention of holding on to it and selling it (often to a developer) at a profit at a future date.
Land banking companies typically seek investors to buy small plots of land and promise them high potential returns. Some may also promise regular payouts for a fixed period.
The land is usually on the outskirts of a city, where urban development appears to be likely to take place. Investors are often told that developers would be willing to buy the land at much higher prices when the land is developed or when plans for urban development are drawn up.
2) What are the key risks?
a) It could turn out be a scam
Investing in land is not always equivalent to investing in solid ground. Some land banking schemes have turned out to be scams.
The UK’s Land Registry issued a guide in 2008 warning the public about land banking investment schemes that often advertise big returns, and that many investors end up handing over money for plots of land which have little or no chance of being developed. You can read the guide here landreg.gov.uk/assets/library/documents/public_guide_021.pdf
In Canada, the New Brunswick Securities Commission has also warned investors to be wary of land banking. Investors should be cautious of land banking when the land is being sold in a location with which they are not familiar.
b) What if plans to develop the land are derailed?
Consider what factors could derail the land banking firms’ plans to develop the land plots as planned.
Land banking schemes generally project that the value of the land would increase exponentially when permission is obtained from the relevant authorities to develop the land, be it for housing or other purposes. This may sound promising. But if permission to develop the land is not obtained, the value of the land plots would be affected. Do also note that in some countries, “green belt” or agricultural land are often protected from development by planning law. Selling these land plots would be very difficult, especially at a profit.
Also, even though the company may project that the value of the land would increase in, say, four or five years time, this is only a projection and ultimately still depends on an acceptable offer coming in to buy the land.
Once an offer does come in, the sale may be conditional on a majority (for example 60%) of unit holders in the land parcel agreeing to sell. So when an offer comes in, there will be a vote. You may be willing to sell but if the majority wants to hold out for a higher price, your money will be tied in for longer.
If no offer comes in, your money could also be stuck in the scheme for longer than the projected period.
It is also useful to find out what could happen if the firm is unable to sell the land plots within a certain time frame. How would the timeline for developing the land be affected? Drawing up development plans and developing a piece of land takes time, at least a few years. What could happen to your investment if the firm does not have financial resources to see through the project?
c) What if you need cash urgently?
For land banking, you must be prepared to wait. If you find that you need cash urgently before the land banking operator sells the land to say a developer, you may find it difficult to sell your land plot to other parties.
d) Foreign exchange risks
Land banking propositions are usually marketed to overseas investors. If you purchase a land plot in a foreign country such as Canada, USA or the United Kingdom, you would be exposed to foreign currency risks.
3) Is land banking regulated by the Monetary Authority of Singapore (MAS)?
Land banking which involves investors acquiring direct interests in real estate rather than securities (such as collective investment schemes) related to real estate is not regulated by MAS. Like many securities regulators around the world, MAS ‘ role is to regulate the financial markets and the activities of financial markets participants.
The Securities and Futures Act (SFA) and the Financial Advisers Act (FAA) give MAS regulatory powers over stock and futures exchanges, financial institutions, brokers, fund managers, and the offering of securities and other financial products to the public in Singapore.
The primary reasons for regulating financial markets are to manage potential systemic risks that may arise in the event of market failure and to help safeguard investors’ interests when investing in financial products.
With the focus on financial markets, the SFA regulates the offering of real estate related investments if they are in the form of securities. However, land banking investments typically involve investors acquiring direct interests in real estate rather than securities related to real estate. As such, land banking investment typically falls outside the scope of the SFA and FAA.
MAS advises consumers to deal with regulated persons when it comes to managing their financial affairs such as investments.
You can check two lists:
(i) The Financial Institutions Directory at www.mas.gov.sg for a list of financial institutions regulated by MAS. After you have located an entity on the list, take note of the regulated activities they are authorised to provide. Note that land banking investments that involve investors acquiring direct interests in real estate are not regulated by the MAS.
(ii) The Investor Alert List (IAL) at www.moneysense.gov.sg which contains a list of persons, on whom MAS has received information may be conducting activities regulated by MAS without authorisation. The list is not exhaustive, and is updated from time to time.
MAS aims to safeguard the interests of investors by authorising competent and professional persons to provide regulated financial services. If investors choose to deal with persons that are not regulated by MAS, they forgo the protection afforded under laws administered by MAS.
4) Key Questions to ask yourself
a) What do you know about the land you are purchasing?
Often the land sold to investors in Singapore is abroad in UK or Canada. Ask yourself whether you really want to buy a plot of land that you have never seen. What do you know about the area?
Even if you have sighted the land, how much do you understand about the property, prices and land development laws in that country, and in that area? How can you be sure if the purchase price quoted to you is a good deal? Do you know what is the likelihood of the land value rising? Do your own research and do not simply rely on the salesman’s advice. They may exaggerate the value of the land in order to close the sale.
b) What do you know about the company you are dealing with?
There might be a professional looking website and an authentic sounding name but what is the background of the company? Have you checked if the firm is regulated in the country that they are set up in or selling the land in? If they offer to “reserve” you a plot of land for a small cost, how can you assess if this is a credible offer? Can you really trust them with your money? Have you found out what recourse options would be available to you if you later find that you have a problem in your dealings with the company?
c) What do you know about the law of the country where you are investing in?
What would be your rights to the land as an investor? What recourse is there if a dispute arises with the company?
d) How can the company afford to offer such high returns or promise of a big profit?
What are the returns dependent on and how often will you receive them? Are the returns guaranteed and do you have this in writing? How easily can you find out about any increase or decrease in value of the land? How long must you stay invested for and what are the pitfalls if you need to draw out your money early?
5) Conclusion
Before you place your hard-earned money in a land banking proposition, examine the details carefully.
Do not be lured by promises of high returns. Always ask when you can incur a loss, what factors could result in a loss, what can happen in the worst case scenario and your options for recourse should you have a problem.
Do not rely entirely on what the person marketing the land banking proposition tells you.
fr:moneysense.gov.sg/publications/quick_tips/Consumer_Portal_Land_Banking.html
HDB MOP rules apply to land banking scams too. Expect follow up for REITS and Capitaland shares next week.
Sounds of coffee shooting out of thousands of nostrils throughout Singapore shattered the early morning calm of a lovely Sunday morning, as HDB would-be owners discovered that – smack on Page 2 of the Sunday Times – HDB’s recent “no private property at the same time” rules apply to Walton, Profitable Plots (haha) and other land banking scams that have run rampant in Singapore over the last few years. In what seems to be slowest press release ever (spread over several weeks, since it seems that HDB is taking its own sweet time in clarifying the impact of its rules, based on committee), HDB says that land banking – even if it’s a minimum of SGD1000 investment in a piece of paper declaring 1/100000th ownership of a piece of *cough* property next to Canadian oil sands – is considered too complex or risque for heartlanders. Be prepared (with lots of Xanax) for part 36 of this ongoing press release from HDB next week, as they possibly announce that all investments in REITS and Capitaland/HoBee/CityDev/SCGlobal shares have to be sold off within 6 months of buying a HDB property.
From ST “HDB rules apply to landbanking”
Housing Board flat owners who want to invest in land abroad through landbanking companies will now have to think twice before parting with their savings.
The HDB has confirmed with The Sunday Times that they will be caught out by Singapore’s new property rules, which state that HDB flat owners are not allowed to concurrently own an HDB flat and private property – local overseas – within the minimum occupation period (MOP).
An interest in residential land, even vacant land, does constitute ownership of private property, the HDB said last Friday.
This means that if a landbanking investor who has a share of residential land buys an HDB resale flat on or after Aug 30, he must dispose of one of those properties within six months of the purchase.
It also means that an HDB flat owner can enter into a landbanking investment that involves residential land only after the MOP of five years.
An HDB owner yet to meet his MOP will therefore need to be careful when investing in landbanking firms, as he might have to dispose of land initially not zoned residential if it later acquires residential zoning.
But the HDB has also acknowledged that there may be small groups of people who require special consideration and is willing to help them.
‘The HDB will need to look into the specifics of such cases, and evaluate whether the interest in the land is substantial enough to be considered private property ownership. They can write to us with the necessary documents and details of their appeal,’ it said.
Landbanking firms buy large plots of land and subdivide them into smaller parcels to sell to investors.
These firms usually tell investors they can buy undeveloped plots of rural land overseas. When development plans are drawn up, investors are told they can sell their plots to developers who are willing to pay higher prices to secure the land.
For example, Canadian-based Edgeworth Properties, which has about 2,000 Singapore clients, of which about half are HDB flat owners, is offering investors the option to buy 7,260 sq ft – or one-sixth of an acre – of land in Alberta, Canada, for about $15,000.
This plot, however, already has an area structure plan that establishes the general planning framework for future development.
Walton International, a Canadian-based landbanking firm, said it was too early to comment on the effect the new rules would have on its business. But it added that it was discussing the matter with the HDB.
Another landbanking firm, which declined to be named, expects to be unaffected by the new rules.
It said half of its land parcels were sold to developers ‘within months’ of zoning approvals being obtained. This means that investors exited very soon after a piece of land was zoned residential.
The remainder were fixed-term, fixed-return contracts that would see investors getting their payouts before any homes are built on them.
But while the effect of the HDB’s ruling may still be unclear, some landbanking investors are questioning its rationale.
One investor, who wanted to be known only as Mr Lim, said landbanking should be seen as a real estate investment scheme rather than as having an interest in private residential property.
‘We are at the very early stages of the real estate life cycle, before even any dwellings are built… It is more of an investment where you get in and then get out. I don’t think landbanking should be covered under HDB’s rules,’ he added.
Mr T.H. Tan, who has been approached to invest in land through landbroking firms in the past, added: ‘What happens in six months’ time if the private property investment cannot be disposed of, maybe due to a lack of takers? What is the Government going to do to help these people?’
Mr Christopher Tan, chief executive of financial advisory firm Providend, said that with most Singaporeans living in HDB flats, and the investment quantums involved in landbanking not being very large, the majority of landbanking investors could well be HDB dwellers.
He disagreed with the HDB’s ruling as it would not help to cool down the property market, but he added: ‘This is one more reason for investors to be more cautious when investing in landbanking, since there are even more grey areas and unknowns to navigate now.’
fr:singaporeuncletrader.wordpress.com/2010/09/26/hdb-mop-rules-apply-to-land-banking-scams-too-expect-follow-up-for-reits-and-capitaland-shares-next-week/