Land Banking

[beech]

Only 20 syndicate members Mark

 

[Corsa]

The key thing here though really is that this is a long term purchase by an experienced and wealthy investor!, with money to spare and risk spread among 50 or so investors.
It would not be good practice for a limited investor to buy properties for top dollar and believe that it will work itself out in the long run.

Hi markpatric

some good thoughts in this post.

I meant though generally for any kind of investment, getting one's head around the price going up which has been happening all around us over the past 5-6 years. It is important to note that even 3 years ago people felt the market had peaked but all the indicators were suggesting there was still room to move up. I am not saying that you buy at a point where there is still no room for growth though, all the indicators would still need to be positive.

In peter's case, even if the land only goes up marginally then he at least between himself and the syndicate they havent been tying up a heap of capital plus on-going cashflow for something that won't bear fruit. Although even just based on Peter's analysis and his aerial shots, I cant really see that happening.

And in any case, we will only find out in 10 years whether this strategy paid off. In that time, assuming the investment did go well, once you have the proof that it has been a good investment, it would probably be a bit more difficult for you to buy into that kind of investment at the price Peter & Syndicate have paid. And then it gets back to the point I am making, where people have to get there heads around paying more for properties that used to be cheaper, but potentially have more room for growth...etc etc

But I still think your points are valid and definately worth considering.

Best wishes

Corsa

 

[markpatric]

Hi Beech, I read back but couldn`t find where it said 20 investors just that each put in roughly $117k which would be far closer to fifty than twenty, considering it was nearly 5 million.

I did miss the part about adding the houses and cows, makes sense in a way but how much more cost there?, at what sort of return?, I hope I don`t sound too critical of the deal but I tend to think more short, medium term when investing so it`s not in my ballpark to start with.

Corsa yes I did see your point but this attitude I think could more often than not lead to disapointment, I suppose it`s where experience comes in.

 

[geoffw]

Hi Beech, I read back but couldn`t find where it said 20 investors just that each put in roughly $117k which would be far closer to fifty than twenty, considering it was nearly 5 million.

In this post

 

[markpatric]

Geoff, 20 investors putting in 117k does not cover 50% of the purchase price?.

 

[quiggles]

Just in case you think it isn’t attainable for “mere mortals” we put it together in a syndicate with each person contributing $117,000 odd with about $15,000 a year each to cover holding costs (including projected interest costs). It will be financed on 50% LVR non-recourse. Any income will be split between the syndicate holders and because it is in a unit trust the income / tax benefits will flow through to the syndicate members.

(emphasis added)

It works out to $117,000 cash and $117,000 borrowed per member. I believe they are using leverage. $234,000*20 members = $4,680,000 which is enough to close the deal.

 

[Sim]

More the point, I believe you cannot put together a syndicate of more than 20 people without a prospectus being lodged with ASIC - hence the 20 people is kind of a "magic" number.

 

[Aceyducey]

I think the fact that there are fifty people involved in this investment could also be seen as a lack of confidence in the purchase, spreading the risk but ultimately minimising any if any gains.

Gee Mark,

Do you own any shares in listed or unlisted companies?

If so, you should sell them all NOW - with hundred, thousands, even MILLIONS of people involved in those investments you can't have any confidence in them at ALL!


PS: With 20 people you may need ASIC approval as well. If a corporation there's the 20/12/2 rule - maximum of 20 investors in a 12 month period contributing $2 million....EXCLUDING foreign investors and Sophisticated investors (which is measured purely by $s).

If a managed fund of some type, best to have ASIC approval (and a financial license - which Peter's company of course has).

If a partnership - don't go there!

Cheers,

Aceyducey

 

[markpatric]

Shares ain`t for me Acey!.
I sure miss a lot when I read fast!. Sorry people.

Your average Joe would not have a spare 120k and can afford a non income producing loan of 120k on top.....for ten years or more?.
I would be interested how they got the investors together, if they are all wealthy and experienced investors and what would happen were one or more to want to cash in earlier than the rest, could get very complicated?, and very nasty, very quickly.

 

[see_change]

Shares ain`t for me Acey!.
I sure miss a lot when I read fast!. Sorry people.

Your average Joe would not have a spare 120k and can afford a non income producing loan of 120k on top.....for ten years or more?.
I would be interested how they got the investors together, if they are all wealthy and experienced investors and what would happen were one or more to want to cash in earlier than the rest, could get very complicated?, and very nasty, very quickly.

Mark

It's obviously not the sort of investment for you at your current stage , if you have so many concerns about it.

You have raised valid points, but you really seem to have a bee in your bonnett about this.

I think most people on the forum are very interested in hearing about what Peter is doing.

Even if it's not what they are looking for at the moment , it may be something they would consider further down the line , when they do have 1-200K which they can happily put away with the aim of larger gains further down the line.

Lighten up

See Change

 

[Sultan of Swing]

Shares ain`t for me Acey!.
I sure miss a lot when I read fast!. Sorry people.

Your average Joe would not have a spare 120k and can afford a non income producing loan of 120k on top.....for ten years or more?.
I would be interested how they got the investors together, if they are all wealthy and experienced investors and what would happen were one or more to want to cash in earlier than the rest, could get very complicated?, and very nasty, very quickly.

Hey Mark

If you read R E A L L L L S L O W W W W, you'll find Peter addressed all those points too!!!

Start again from the top!

Cheers

 

[Aceyducey]

Mark,

Clearly you're not the audience.

Can I suggest that your time would be better spent critiquing investments that fit your criteria, interest and financial capabilities.

Cheers,

Aceyducey

 

[craigc]

Mark,

Thanks Peter for the details, Mark if you think you might question Peter's insight you are kidding yourself.

craig

 

[markpatric]

CraigC my investments have all paid off, whether in Rocky, Bundy or Brisbane the return on my original investment is something I would not even work out it would be astronomical.
What is it exactly you have against buying in regional areas?, I suggest you change that idea in a hurry.
I have had some problems.....so what?, that`s R/E, they were overcome.

All my properties bar one are/were renovated and sold at market value, what is it exactly you are crying about?.
Regional areas have no redeeming features you say?, I suggest you go and check them out!, especially the areas between and around Bundy, Hervey bay, 1770 and Yeppoon!, BFE is all in your mind!, you need to get out more!, these areas leave every capitol city in Aussie for dead.
Anyhow how the heck would you know what level of equity I was at?, I have never given out specifics regarding my ppor or business interests.

All insight is questionable, especially in property with regard to anyone who is seen to be or places themselves in the "expert" category, no big deal, if you want to get anywhere in property my advise is that you learn to START asking the right questions!.

 

[craigc]

Mark,
I apologise for going off half cocked, you are correct and I shouldn't have cast any aspersions (sp?) on your investing techniques or successes, I apologise. I just felt you seemed to be coming across rather negative towards Peters deal, a deal which I am really pleased he took the time to post the details of. Sorry again Mark.
Craig.

 

[markpatric]

Mark

It's obviously not the sort of investment for you at your current stage , if you have so many concerns about it.

You have raised valid points, but you really seem to have a bee in your bonnett about this.

I think most people on the forum are very interested in hearing about what Peter is doing.

Even if it's not what they are looking for at the moment , it may be something they would consider further down the line , when they do have 1-200K which they can happily put away with the aim of larger gains further down the line.

Lighten up

See Change

Seechange I`m definately interested in what Peter is saying/investing in and I thank him for letting us know but these larger gains are being taken for granted, it will be a long time before any gains are made!.
It will not be the sort of investment I will make at "any" stage, why?, too long term, too many investors!, and from what I have learned so far in this thread I will not change my ideas there.
I have been wrong before in regard to R/E, I`m sure, but I can`t remember when!.
I never did say it was a bad deal, I think they will do well but how well in regard to time, money and effort/stress etc, I do question.

 

[markpatric]

Hey Mark

If you read R E A L L L L S L O W W W W, you'll find Peter addressed all those points too!!!

Start again from the top!

Cheers

Sultan, I have the day off today I will take your advise!.

 

[Les]

"you do the maths" - uh, OK, I'll give it a shot....

G'day Markpatric,

Sorry, mate, but Peter DID say "you do the maths" - so I am:-

First off, Peter is saying that this acreage (116 acres) can be sub-divided into 470 x 1000 sqm blocks. Righto - of course, there WILL be some loss (for roads, etc.) - so let's say 20% (reasonable enough?). This means that the 470 blocks saleable will become 376 blocks. He WON'T be able to sell the roads, but the fact that they ARE THERE should lift the value of each lot.... Fair enough? But first, let's subtract the riverfront blocks (32 of them) So there are 344 blocks for sale that are NOT riverfront....

Also, there WILL be a cost associated with the actual subdivision too (you know, Council fees, DA's, etc.) So let's allow another 20% for that too - and I don't know if my figures are realistic, as I haven't done this before either, so don't crucify me - but I think they might be realistic....

So, because 10 years has NOT yet expired, let's assume that the Council has allowed this subdivision to go ahead. We're now 10 years "down the track" - OK? Let's "do the maths":-

1. There are now 344 blocks available for sale. They would've sold in 2005 for $75000 each - today (in 2015) they haven't quite doubled - let's be conservative - but they are worth $120k each = $41m total !!!!!!!

2.There were 32 riverfront blocks - they were estimated as being worth $400k to $800k in 2005 - let's be conservative and say that (in 2015) they are now worth $400k (conservative enough?) - so a value there of $12.8m

Total value in 2015 (given subdivision HAS gone ahead) = $53.8m !!!!!!!!

Now, before I forget, let's take the Council's 20% off the final figure - that leaves the final value at $43m !!!!!

Your average Joe would not have a spare 120k and can afford a non income producing loan of 120k on top.....for ten years or more?

Hehe - it depends what "Average Joe" you're referring to here, MP. I can certainly find $80 per week ($160 / week with 1515 in place) to have a 1/20th share of $43m in 10 years time !!!!!!

Even if NOT tax deductible, it would cost me around $8,000 per year ($160 per week) for 10 years ($80k) to have a shot at $2.1m Reckon I could find that sort of dough on that basis !!!!

And if ONE of my properties can't make $8000 pa in Capital Growth to offset the risk, I'll give it all away !!

We're talking a 35% pa return here !!! What does Warren Buffett aim for?

Regards,

PS How's my maths, people? Did I stuff up? If I didn't, it HAS to be a WINNER (and well done, Peter). If I DID - please tell me - I'm trying to learn too......

 

[peteb]

Peter Spann is in the big league.
He has money and also the luxury of being able to invest it and wait for it to pay off.
It doesn't need to be making money right now as he probably doesn't have any trouble servicing it.
I love reading 'deals' such as this as most people tell you after they have made money where as Peter Spann doesn't mind telling us now.
It makes my mind think .... which is not a bad thing.
In the end if he isn't worried about the deal then I don't think we have to worry about it for him.
I'd rather see 20 posts like his of detailed deals than 1 post of his and 20 posts from everyone else trying to work out if it is going to work or not.

 

[qaz]

I think Peter has hit on one of the aspects of investing that I find particularly interesting, the psychology behind paying more for investments as time goes on.

Think about it. Whatever the price you paid for your first investment. Say $100,000. You watch in earnest while the price rises to $120,000. You think to yourself "everything is going smoothly, going well, some capital growth". The price continues to rise to $140,000. If you see something on the market that you can get for $120,000, its a bargain right? So you might even buy another one for $120,000 if you can.

The price continues to rise till they are worth well over $200,000 at $250,000. All the indicators for this area are still promising, lots of population growth, demand, economic propserity etc etc. All signs indicate to these properties being worth over $400,000 down the track. You see another property come onto the market at $220,000, is it a bargain?

You think to yourself "no", I remember buying these when they were only $120,000. The most I will pay is late $100's you say.

The same applies to when XYZ share was trading at $4 and rises to over $20 but you cant quite buy in as you remember how cheap they used to be.

The point is, getting one's head around paying more for a property or shares as time goes on can be quite difficult. Of course if you can't see any future potential or value then not buying makes sense, but sometimes even if you can see the value or potential it can be tempting to "wait" till prices come back down to the level you are used to.

Overall I think that what Peter is doing is fantastic and I am grateful that he shared this deal with the rest of the forum

Best Wishes

Corsa

Travis Morien talks about it in his psycology of investing section of his website(http://www.travismorien.com/FAQ/main.htm). It's called Anchoring......