LAND BANKING – PROS V CONS

Land Banking has been around forever, and councils historically have always changed the borders and policies.

Why on earth would you go into Land Banking alone, or land banking in Australia? You will certainly be waiting a lifetime, but not if you invest in the UK.

If you do your research properly, you will find hundreds of articles verifying the fact that is there is indeed a housing crisis in the UK. There is in fact a shortage of housing and a shortage of land with planning permission; with UK government documents substantiating this and that current boundaries are under review. There is also a myriad of news articles verifying that councils are changing their policies regarding land previously deemed ‘Green Belt’- and in addition to agricultural land, councils have already released and will continue to release ‘Green Belt’ land for planning permission.

Why on earth would you go into land banking alone? Certainly, you need to invest as part of a group. This enables you to form a group that can then work together to obtain planning permission. Your strength in lobbying the government/council is in the size and location of your land bank. Planning permission applications cost around $100,000-200,000 in the UK, hence when investors purchase land from landbanking companies such as ELS, of course they pay a ‘premium’ over and above the current market value of the land. This money is required to pay for the overheads associated with business operational costs and also to gather sufficient funds to apply for planning permission, and of course all businesses need to make a profit however the ‘premium’ paid is unlikely to result in a significant profit – these companies are relying on the returns on their share of the land once it gets planning permission, just like their investors. At least with companies like ELS, investors are supported to become members of a Plot Owners association. This means that in worst-case scenario, even if the company failed, investors can work together to lobby the government and apply for planning permission, with the cost of the application spread over a large number of investors who will more than cover that cost when planning permission is granted. Investors in land – property agents & planners etc in the industry – have been making a fortune in this way for years. At least these new land banking companies are giving the ordinary investors like you and I the opportunity to invest in what was previously only available to those in the industry or in the know. Just like the share market was, and just like Options trading previously, only those brokers in the industry or in the know were privy to and able to invest until such time as they began to educate people like you and I and open up opportunities to invest and reap the high returns they have been enjoying for years.

Note that companies such as ELS retain a portion of the original acreage – they want planning permission just as much as their investors since that is where the real returns lie. Just as others on this chat site have commented, working in partnership with others is a much better way to go than trying to do it solo. ELS also guarantees in writing – in their terms and conditions – a minimum 300% return or the market value of the land – whichever is the higher (yes, whichever is the higher return) – to their investors. You should read the terms and conditions before making a judgement based on a real estate agent that leverages his entire brand image off pursuing alleged crooks that have no criminal record.

Be very careful what you believe in the news. Remember that Jenman leverages his entire brand image by pursuing alleged crooks. Sure sometimes he is right, but does that mean he is always right? Note that Jenman has merely rehashed Invest Drinks gossip mongering without checking his facts properly, and Channel 9 have simply jumped on the gossip mongering bandwagon on top of Jenman and Invest Drinks. Note also that Jenman intentionally continued to antagonise Stephen Cleeve on Current Affair by blatantly shoving a camera in his face on more than one occasion, after their little tussle. How carefully did you watch the program, if you saw it? I wonder what bit of that scene Channel 9 cut out. Maybe Jenman had a go at Cleeve first…. On the topic of Jenman’s so-called ethics, note he also clearly states that Cleeve is a crook despite that Cleeve has no criminal record – if you research Invest Drinks sources of information properly you will find that much of what is written has been manipulated to paint a picture and convince you that Cleeve is a conman or whatever, or as Channel 9 says, trying to rip people off. Is he really? Not everyone in the real estate business in Australia likes Jenman either, or considers him ethical. And, since when is the media ethical, especially corporate powerhouses like Channel 9. They dictate what they want you to know and how they are going to show it to you. They cut out bits of interviews that don’t support their argument. It’s common knowledge that you can’t trust the media or journalists. It’s called propaganda.

I also noticed that the office manager that was interviewed said the office was a shambles and the bills not paid. But if she was the Office Manager, then why did she allow the office to be in such a state, and why did she not take any action to get the bills paid? She said she was the office manager for the first 6 months of the business in Australia, so she had plenty of time to take action but failed to do so.

The bottom line is that there are many Land Banking companies in the UK, it is big business there and the fact is there is a housing crisis in the UK that is resulting in land that does or did not have planning permission, being granted planning permission. Jenman claims it will take 500 years to get planning permission, yet another unethical statement from Jenman that is obviously complete rubbish – common sense dictates that it does not take 500 years and quite obviously councils have granted planning permission on numerous acreages of land over recent decades that were at one time zoned agricultural or Green Belt in the UK. The same happens in Australia, that’s how many farmers profit from selling their agricultural land, they get it rezoned and sell it to property developers who then make an enormous profit out of you and I. How ethical is that? Then they try to slander land banking companies that are giving individual investors the opportunity to have what they have been keeping all to themselves.

By the way, the Channel 9 transcript is available on Invest Drinks website should you want to critique what Jenman said.

I remember my parents many times saying they wish they had bought land in several places many years ago as whilst it all seemed too ‘remote’ back then, they would have made a fortune and now regret not having taken up many opportunities that presented themselves. If you listen to the likes of Jenman without using your brain, you will be too scared to take a calculated risk and invest where the industry experts have been making high returns for years. Just like these ignoramuses that scare people off investing in Options. Well guess what, you can prevent your shares from dropping to zero value by using Options to minimise your risk, but the scaremongers would have you believe that Options are high risk. What they are effectively doing is scaring you off making a wise investment decision to cover your shares with Options so that you don’t lose all of your capital if the economy, or the company, crashes. At least with land banking, if the economy or the company crashes, you will never ever lose all of your capital.

So, what is the risk of investing with a company like ELS? Landbanking is for high wealth investors that can afford to get zero return on surplus investment dollars for a few years, possibly many more. That is why it is said to be high risk. There are no guarantees, but the upside is a 300% return minimum guaranteed. Outside of this, if you want to be a complete pessimist and look at absolute worst case scenario, the most you might lose is the difference between the market value and what you paid, unlike the risk of investing in the stock market where the value of your shares can bottom out at zero value and become completely worthless overnight. People that are not high wealth investors have lost considerably more money investing larger amounts in the share market than the cost of one plot of land bought through a land banking company. So, which is more ethical? Trying to get people to invest in a bunch of shares that could result in the loss of all your capital (and telling them that Options are high risk), or trying to get other people to invest in a plot of land that will never result in the loss of all your capital, and working together to get planning permission? That is what companies like ELS are offering.

Just because a few investors have complaints, doesn’t mean all clients are unhappy with ELS. After thoroughly reading all the literature and checking the facts and sources of information, I happen to agree that Cleeve is the subject of a smear campaign driven by Jenman.

What a rant…..
I gave up reading in the first paragraph.
But one sentence struck me…
‘Why on earth land bank in Aus?’
Simple answer…because its profitable.

When you can get 60 acres for under $250,000 on ‘freehold’ land, with a zoning for subdivision already in place, and the cost of application for DA is not in the 100’s of thousands, why wouldn’t you land bank ??

The holding cost on the land is minimal, and there is potential to derive an income off the land in the meantime, thus making your holding costs tax deductible.

And in the meantime, the sales evidence for the area points to the land value increasing.

There seems to be the perception there there is unlimited land in Aus therefore there is little sense in holding land, or investing in land, but that is not necessarily the case, as location and demographics have an impact on whether land is valuable or not.

As part of a diverse strategy in property investing, land banking is a great subset.

kp