Land Banking Risks
Land banking in US still attracts a sizeable crowd. I did not meet the sales consultant for a few weeks, and she told me the project she had introduced to me was more or less sold out. She then introduced another project in Texas to me. I promptly bought it.
Some of the risks for such projects should be mentioned. First of all, currency risk is very strong. Nobody ever expected the Canadian dollar to be stronger than the US dollar, but it happened. The US dollar is declining, and the Singapore government had mentioned that they would continue to let the Singapore dollar appreciate against the US dollar to combat inflation.
When I put my deposit, the exchange rate was S$1.39. When I paid the rest, the exchange rate was $1.37. The sales consultant was overly excited about the exchange rate, though I told her coolly that it would fall further. True enough, it fell another $0.02. In the short term, the currency risk is very strong.
However, if you look at it long term, if the company promises to double your investment, the gains should outweigh the risks. With the economy in downturn now, it should recover in 4-7 years time, and it should emerge stronger. Promises of doubling also are dependent on the length of time. An investment that is worth $20000 now compared to the original $10000 may sound good. However, if it takes 7 years, then the annualised returns are definitely much lower than a 4-year turn.
One reason for the quick launch of the new project was in part related to the crisis in US. The homeowner needed cash urgently, and the land banking firm had the cash as it is cash rich, so it was able to depress the prices even lower. The original project costs US$40000 per acre, while the new project costs US$30000 per acre and it was even closer to suburban areas instead of rural areas. This means that the speed of development could be shorter, but again, this is dependent on the plans and in my opinion, the US economy.
Actually, I think Canada will make a better investment choice as it is rather constant in terms of development and they are not facing any crisis.
Another risk involved in land banking is the length of time. For other investments, the liquidity level is quite high. For land banking, you must be prepared to wait. It is possible to sell back to the developer before the land is sold, but there would be other hidden costs. Some people may require the sum of money urgently, and this is a problem as they cannot liquidate the holdings quickly. It would take quite some time even if you sell the unsold land share. Hence, this form of investment is not encouraged for those who require cash urgently. This should be additional money you do not require.
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You mentioned Canada will make a better investment choice. You might wish to check out Edgeworth Land Banking opportunities in the Oil Rich province of Alberta, Canada, and the boom in all sectors are just at the begining. Time Line for Exit is between 2 to 5 years with Gurantee Returns by Edgeworth and Principal Protection.
Heard another US land banking company operating in Singapore and Malaysia called Malton Estates Development offering land in San Marcos/Austin area. The land includes 3 commercial lots which their consultant said are more valuable since it sits on a major road frontage on Highway 21. The offer is packaged into undivided lots with entry level ranging from USD4000 up and said to be cheaper than their competitor, Walton International.
What is most interesting is that the land comes with freehold oil and gas mineral rights and there are numerous production oilfields in the area. Walton does not include mineral rights which in their contract specifically indicate that they will keep it for itself. We all know that Texas is rich in oil and gas and owning this mineral right makes sense. A friend of mine who lives in Texas and is a oil man said that it is stupid for any land buyer in Texas not to have the mineral rights when they buy the land. He did a quick check on land in counties offered by Walton and Malton revealed that there are many production oil and gas fields and many geology fault-lines (oil and gas generally gets trapped in these deep earth layers down some 2,000 to 30,000 ft). Interesting!
HI Guys, my friends and colleagues went to the 2- day T-Harv Eker Seminar today in Expo.
Turns our T-Harv Eker himself has been a client of Walton!!!
He confesed to everyone that he is pretty happy with this diversification and he allowed our VP of BD to step up and give a short introduction on Pre-development Land Investing with Walton Int’l.
I was pleasantly surprised
Just FYI
I don’t know about you guys, cause investments criteria varies from person to person.
Potentials definitely play a part (e.g oil, Texas, etc)..
but before I would study any future potentials I would check the Track record and fundamentals of the company first.
So its 1. Track Record & History (at least 15-20 yrs old company., track record .etc)
2. Fundamentals (concept) (what they do to profit for us etc)
3. Future potentials. (whats outlook, why this location etc)
And Walton passed my standard for these 3 points. Heard of Malton from a colleague, but not familiar, so, not sure about their credentials. Sory
I wonder if land banking investment is a good choice with these current events. I know a few people who have done very well in some countries like in the UK where land prices are rising due to the housing crisis. In fact it is constantly on the news plus the government keeps banging on about building million of homes 4 years from now.
And now we have ex brokers doing land banking trying to promote themselves on this wine forum. these people are move fast. Didnt you read the title of this forum Mineral Rights? Or are you an uneducated greedy pusher- the typical profile of a wine broker. You guys don’t KNOW how to do anything else, no one will employ you so the only thing you can do is CHEAT, ROB and STEAL from others.
In LandBanking “Time” is the only risk besides being illiquid.
Always have spare cash to risk that gamble. It is like a Lottery Draw on when your project will be EXITED or none at all.
The fear factor is: when it gets too big then where are the developers? …..a bit tricky though!
BTW ….Walton has proven Track Record where EXITS are concerned, Haven’t heard about the others, perhaps waiting till the “cows come home” as most land are termed Raw land or Agricultural Land. Cheers for Walton!