I realize land banking has been getting a bit of a bad name here in Melbourne because of that bloke, Stephen Cleeve http://www.stephencleeve.com (this site is an eye-opener!!) and a company called European Land Sales or ELS, but I am NOT talking about land in England.
I saw some comments from Peter Span (can’t find them now!!) about land banking. I think Peter has some good advice and would like to check it out some more. Anyone involved? I’d like to know both the pros and the cons.
On the fringes of say Brisbane or Sydney, it would have to be a good investment. I am getting the impression it will still be too much for just one person which would mean a syndicate or JV.
Any one know of any one who is into this or, best, has anyone done any good with it?
Best
Leo
The con with land banking is two fold. 1) No income; 2) It can take a very long time (which can also have it’s bad points in terms of different Gov./Council agendas).
Hellman
Thanks Hellman. I am aware of the cons of land banking but that’s not what I am talking about.
Done well, it must have potentual, surely?
The basic concept has a good feel to it.
Regards
Leo
you can compromise with landbanking. Ie: buy a house with a large component of the value/price relates to its potential to build more dwellings on the land.
Townhouses/dual occ. down the track for instance.
As you have worked out land is great and always appreciate in value. But plain and simple vacant blocks are very expensive to own week by week as there isn’t the tax advantages and there is no rent to subsidise holding costs….. as opposed to residential dwellings.
Good idea to throw a bit into a well balanced portfolio.
A portfolio with A few cash pos. props to pay for a big slice of urban fringe land would make for a very tasty package if it was affordable.
Live, Learn and GrowLifexperience
The article you saw about Peter’s landbanking would have been in the latest issue of API magazine. There was also a post on SS about it
have a look here:http://www.somersoft.com/forums/showthread.php?t=21137&highlight=landbanking
Cheers,
Pro-ActiveThanks a lot. That’s the sort of info I was looking for. How nice to see something seemingly feesable in Oz rather than something crooked in the UK.
Still, it’s a big cost, so maybe a regional center that’s growing or a syndicate is the way to go.
Be good to get some thoughts from others.
Thanks anyway
Leo
Start lanbanking by buying the house next to one of your IP’s if it becomes available..then look at what you can do with both blocks of land in the future..
Thats how I look at Land Banking…Peters done it on a larger scale..
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi Leo,
Your last post pretty much hit the nail on the head…
You have to start somewhere and preferably start small.The multi million price tag may look scary but when you divide it between 5, 10 or even 20 investors, its no different than a typical residential property sized investment.
So two points…jv or syndication is the way to go, and looking a little further out from urban areas is also the best option.One last thing as per P Spann’s post, by having a dweling on the land, or even running cattle by agistment ( if you don’t want the hassle of looking after them yourself ) you are able to generate some income off the property, thus allowing you to claim all the costs in holding the property till it is ready for development.
Its not just theory…it does work and is a feasible strategy to persue, if you are inclined in that direction..
kp
Thnaks kp. It seems that it is a winner and I feel more confident. It also seems that no one has really done it yet in Australia. But, hey, that’s not a reason not to do it.
If anyone has done it, it would be real good to hear from them.
Any one out there???!!![biggrin]
Leo
Peters an Aussie ??
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorYes, sorry I know Peter is an Aussie, but what I meant was have any little investors – such as me – been involved in land banking? If so, they are the ones I want to hear about.
Peter Spann is too big and Stephen Cleeve and his sort are so short on honesty, that what I’m looking for is a normal sort.
Hope I am not being a pain. But you all say to be careful.
Leo
Hiya Leo,
Not sure if we fit your classification of a ‘normal little investor’, but I suppose our latest acquisition could be classified as landbanking.
We managed to pick up about 2 acres in the middle of Perth with structures on it that make it nie on nuetral cashflow…dunno if that then throws it out as Landbanking or not ??
What’s the definition of Landbanking ?? Anything that is horribly negative cashflow ?? If so, we are definitely land bankers…
Anyway, we’ll sit on this corner parcel of dirt for a while and see where life takes us. The previous vendor has an adjoining 1 acre property that we are also looking at picking up…that one’ll be +CF however.
We reckon holding 3 acres on a corner site in the middle of Perth at no cost to us might come in handy later on down the track.
Just gotta convince those pesky money lenders.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Yea, thanks Dazzling, you sure fit my definition of “one of us” – the smaller players.
At least you’ve shown the guts to do it, even if you haven’t reaped the rewards – YET (love that word, you can use it any time to excuse almost anything, especially in investing!!).
Let us know when the harvest comes in; meantime, I think this feels and seems good enough to do sow my own seeds.
And yes, I’ll watch out for the income problem. Maybe a horse or two will help pay the bills while I wait. Ha.
Thanks once more.
Leo
Leo,
I am only small time investor in that I still work a regular job and have a modest income.I have gone into a 3 way partnership that I suppose is effectively landbanking. About 70 acres of rural land with a house on it (now tenanted by previous owners) close to a Major Regional Centre.
It is rural and negatively geared. However it is surrounded by 5 acre country properties. There is a market for people who want a big country block for a few horses and motorbikes(3-5 acres) BUT not so big that it requires a LOT OF MAINTAINANCE (15 acres +) IE: fencing, weeds, grass, cattle, .
We have some cows on it. OH! you should have heard the cow cockies snigger as us city slickers turned up to the stock auctions and bought some steers and then tried to hand shove them into our trailer……. the young steers are very heavy and stubborn we soon learnt.
So I guess you could call that land banking. We plan to hang on for 5 years or so, and then subby and sell.
Something that really stuck in my mind was talking to the farmers at the auctions, some that had 100 acres or so in the middle of no-where 5 years ago. The same land they bought has became urban fringe with the melbourne sprawl. And even allowing for a property boom, theirapital gains when they sold to developers was a LOT more than 7% p.a. you may expect from residential property.
Land in Australia is Cheap. Compare similar agricultural block sizes to that of Europe for instance.
Be aware that in Melbourne (and maybe other capital cities), that the city has drawn a line around the fringe, and deemed that all development til 2030 will reside within these boundaries. Obviously looking after their own interests by jamming as many people in and around existing infrastructure. Land just inside this boundary is being gobbled up by new house and land devolopers. Land outside may have to wait a long time to get their cake sliced up.
Land on the fringe of major regional cities would be a very good buy on the other hand. Often for the same price as a house in the inner city.
Large blocks near the coast may also have potential.
Or even houses in the inner capital city growth suburbs with enough room for another dwelling and close to shops and facilities, would probably get an easy stamp from town-planners for a small sub-division.
It would require thorough investigation of what is happening in any area that you chose to consider “landbanking” WRT demographics and how they are changing, council guidelines and current developing approvals, what boundaries the bigger developers are pushing due to demand from new home buyers, where you think all the retirees from Australias baby boom are going to live, where all the new single households are going to live, and the usual research you do in an area.
I don’t want to reassure you to buy, as you really need to completely satisfy yourself and thoroghly research an area first. There are still large expanses of land in Australia that will still be sitting there doing nothing in 50 years time.
It is a big country with only a few people around in the end. Be careful of exactly where you buy.
Live, Learn and GrowLifexperience
Originally posted by Dazzling:
[br
What’s the definition of Landbanking ??
DazzlingIn references made pre boom it referred to buying a large property usually rural zoned non residential and sitting on it hopefully until it is rezoned and someone pays you developer prices for your acreage.
As soon as the zoning change happens the value jumps 3 to 5 times.
The current values of such properties reflect the polpular opinion of how far away rezoning may be.
Yes, once the land zoning is changed the value will jump at least three times (often much more); but you need to be really careful that you do NOT pay to much to start with.
I have been doing more research on this and the info from the UK is really frightening. This fellow Cleeve and ELS are not the only ones, there seems to be a whole industry there which is built on buying farm land (green belt they call it)for normal prices then selling to us small investors for a huge mark up and then, if there ever is a rezoning, we get a few crumbs.
In all my searching, I can find NO record of anyone buying from a land banking company and making a profit. Plenty of allegations of fraud, but no profit.
Seems like we need to get the message and go for it solo. My money takes me too long to earn without having to loose it to some shark.
Let’s show them how to do it, safe sure and solo.
Leo
As examples in the hills area NE of Sydney most ppl on acreage are land banking in their own way.
Two of our neighbours who moved in during the last 6 years sold their acreage and then bought in Glenhaven hoping to sit and do it again.Some others bought 5 acres with older simple 3 bedder brick for 2.05M when it no sold for 1.55M six mths before. The reason, they thought they could sit for a few years and go Sep 5 (O/55 dev)
Laws changed and they are stuck with something that probably could not get 1.45M at the moment.To do land banking effectively you need to have several to spread risk. If one goes off then your average rate of return jumps significantly. Problem is finding like minded souls. Who are patient enough to lock in for 10 – 20 years. (or who have a relative on council )
Your idea of jt venturing is right on the money.
LifeX..
Sounds like fun..
How did you go into the partnership (i.e via a Unit Trust?)
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculatorredwing,
joint owners in personal names. We wrote up an agreement detailing as many of the money issues as possible. Unexpected maintainance, one partner wanting to sell, how payments were to be done, and as much else as we could think of.There is definately a risk dealing with other people and sometimes we have conflict when one person disagrees with another. We just have to thrash it out until we reach a compromise.
It is really improving my people negotiation skills. I have found that a 3 way partnership is a little more balanced than just 2 people. As there is always a third party who will hopefully give a grounded angle to any disagreement. Procrastination has sometimes been an issue, with too much talk going nowhere.
It is a deal that I would not have been able to do on my own, and at this stage I have no regrets.
We decided to go for a joint owners structure for simplicity and to keep costs down. As it turns out here in Vic, we will probably save a few extra thousand as the Vic. Govt. are set to penalise trusts with a big Land Tax increase.
Live, Learn and GrowLifexperience
Thanks for all the great information!!
Getting together with other investors seems a great way to go. However, I wonder if there are laws about getting money from others. Would ASIC come after us if, for instaance, we (my brother and I) placed ads for partners.
Maybe I should call ASIC myself?!
Leo
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