Wholesale land?

[Jodie701]

Last night I went to a 'free' seminar run by the 21st Century Academy about buying wholesale land. To sum it up, the Academy has bought a large amount of farm land just south of Shepparton VIC. They say the land is planned to be developed into residential starting in 10 years time.
They are selling options to buy blocks of land for when this occurs. The options cost max $22k per block and then no more to pay till the land settles in 10 years in which case it's expected the land will triple in value from $90k to $270k. Paying today's prices for tomorrows land.
Has anyone else seen this / looked into it / taken up the offer?

Hubby and I are keen as it all sounds good. The only thing about it that bothers me a little, is that it will pretty much max out our equity (if we buy 3 blocks) and then will have to find extra money to make interest repayments unless we borrow more and capitalise, and we probably wouldn't be able to sell before 10 years as it'll be harder to sell an option then an actual piece of land ... so we'll be locked in.
The options may also be tax deductible so on hubby's tax bracket it'll work out to about $13k per option after tax.

Hubby is meeting with the guy again today.

 

[mary&mat]

Hi jodie701,

What are your investing goals?

10 years is a long time to wait & have money tied up that could be working for you now.

What are the main industries in Shepparton? What are the rental yields like there? Population growth forecasts?

I'm always a bit wary of these 'deals' to triple one's money. If it were true, I think it would've already been jumped on by those far more savvy at investing than I. Then again, you may have found a truly amazing deal...perhaps someone else on here can enlighten us?

Regards,
M&M

 

[Tony3008]

I'm always a bit wary of these 'deals' to triple one's money.

As the well-known saying has it, 'if it looks too good to be true, it probably is'.

If I understand this right, you pay $22K now for the right to buy a block for $90K in ten years, at which point it will be worth $270K. Lots of blocks are currently being advertised in Shepparton for $120K or less.

Just supposing there is a chance of this land being released for subdivision somewhere around 9-12 years from now. To me it looks as if the current holder would have every interest in delaying seeking consent for the release until after the options expire - why would he want to make $68K when he could make $270K - leaving you with the option of stumping up the remaining $68K to get 600m2 or whatever of farmland or losing your $22K in the hope that it comes good.

As to tax relief, if it's not an income-earning investment will you get any?

If I've misunderstood all this, someone will no doubt put me right.

T.

 

[Jodie701]

Hi Mary,

In reality we don't really have any clear investment goals, just going along and seeing where it takes us.

Shepparton is expecting a growth forecast from new employees into the area, to retirees for a tree change. Shepparton produces 25% of Australia's milk and 90% of tinned fruits plus a large amount of fresh fruit and veg. The council says anyone who wants a job in Shepparton, has one.

It's a fact that land goes up much faster then house and land. The problem with holding land traditionally is holding costs when there's no rent coming in.

The solution they are offering is to buy an option to buy blocks of land. You get the benefit of CG with little holding cost.

 

[Jodie701]

Hey Tony,

The amount of land on offer is equal to about 20% of the total land release, so the current holders are still keeping the bulk of it. They're just happy to sell some now at a discount in order to get the money to give to the council to start the development process.

 

[mary&mat]

Hi Jodie701,

Your first sentence really concerns me!

Please don't even contemplate putting your hard earned cash somewhere without a goal in mind & a process set up of how to get there.

From what you've said, you're looking at tying up $66K for 3 blocks. That's a lot of money to throw at something that you're just seeing 'where it takes you'.....it could take you to the cleaners!

Land does appreciate, but out where Shep is, there's loads of it, unlike around the CBD's. There's no scarcity factor so there's no real demand for land. I'm not sure what factors would drive up prices there in a similar fashion to more densely populated areas.

I guess my other concern would be that agriculture & milk production have good and bad years. I'm sure there's a few good years coming now after all the years of drought, but then there's the locusts...hmmmm. What I'm trying to say is that these industries are often impacted by factors outside their control, perhaps more so than other industries.

Have you calculated the return on your $66K if you put it into an established house or unit closer to the CBD? Admittedly CG won't be as great now as they have been for the last 10 years, but how do the figures compare? You'll have rental income too in this scenario.

I just don't see how the land can be that valuable in 10 yrs time & if it is, why is the land holder selling it now?

 

[MJD]

I've been to this seminar before in Sydney from Centrury 21 early this year or last year . I am surprised they are still trying to sell this options. you need to do your homework more carefully, I wasnot interested in the first place as you need to join a life member for the program and still remembered they told you to make decision quickly as not many lots still available. after 1 year the land are still available for same place and from the same seller

 

[mary&mat]

I've been to this seminar before in Sydney from Centrury 21 early this year or last year . I am surprised they are still trying to sell this options. you need to do your homework more carefully, I wasnot interested in the first place as you need to join a life member for the program and still remembered they told you to make decision quickly as not many lots still available. after 1 year the land are still available for same place and from the same seller

Hmmmm, has your hubby returned from today's meeting yet?

This is great info from MJD

 

[Jodie701]

MJD I asked how many blocks have they sold. I was told they sold aprox 500 to their members and that this is their first time round offering these options to their extended email lists. Did you go along to the seminar with someone who's already a member? You don't have to be a member to buy the options, but if you do become a member, you save $10k off the block price plus you get the membership benefits.

Oh and there are over 1500 blocks in total. 500 are reserved for oversea buyers.

 

[MJD]

MJD I asked how many blocks have they sold. I was told they sold aprox 500 to their members and that this is their first time round offering these options to their extended email lists. Did you go along to the seminar with someone who's already a member? You don't have to be a member to buy the options, but if you do become a member, you save $10k off the block price plus you get the membership benefits.

Oh and there are over 1500 blocks in total. 500 are reserved for oversea buyers.

Jodie, now I remember , to get discount you need to join member ( member fee is 3K-5K, can't remember exactly). I wasn't interest in this deal so did not do any further homework . is the land approved for subdivison or not yet. why have to be in 10 years? and 10K off the price if you are the member, it just doesn't make any business sense to me .

 

[Tony3008]

500 are reserved for oversea buyers.

I thought that under FIRB rules you had to start building within a year? if you bought vacant land?

Why should they want to reserve blocks for overseas buyers anyway - if the price is the same it's much easier to deal with an Australian buyer. Perhaps they're hoping to sucker in unsuspecting foreigners with claims of easy riches.

T.

 

[Jodie701]

Yes 3yr bronze membership is $3300.

Looking at current prices, it seems that we'll be paying a premium.

So if we pay aprox $70k now (22k x 3 blocks plus $3300) and $200k in 10 years at settlement (total $270k). Say If the blocks together are only really worth $180k now but triples, then we've got $540k. If it's only worth $180k now and only doubles (7.1% pa), then we've got $360k.


But, we haven't really paid $270k - we've borrowed all of that from the bank. What we've actually put in is $5k per year in interest repayments, ie a total of $50k.


So if we end up with $540k, less $270k in loans, that leaves us with $270k return, or about 5.5 times our $50k (equivalent to 18% pa return). If we end up with $360k, less $270k in loans, that leaves us with $90k return, or about 1.8 times our $50k (equivalent to 6% pa return). Which is fairly ordinary but still not bad.

Hubby's meeting is at 3.30pm this arvo (Perth time)

 

[Jodie701]

Tony because so many blocks were bought at once they've negotiated on their terms. Their members who buy land will have a clause that says you never have to build

 

[Token Funder]

Last night I went to a 'free' seminar run by the 21st Century Academy about buying wholesale land. To sum it up, the Academy has bought a large amount of farm land just south of Shepparton VIC. They say the land is planned to be developed into residential starting in 10 years time.
*snip*
.

"Planned to be developed" can mean a lot...or very little indeed.

How is said land currently zoned?

 

[FormerLurker]

High Risk

I think this is a high risk investment option - it may return what's anticipated or it may not (my moneys on not) but it all comes down to your risk tolerence. If you are going to go down this path why not only purchase 1 lot? this way you can possibly realise some good gains (or minimise any loss) and your also not tying up to much capital which you can invest in alternate investment vehicles.

I agree with M&M though in that you really should decide what you want out of investments then go plan and look for ways to get there rather than something thats" going along for the ride".

my $0.02

 

[Tony3008]

I will confess to not quite getting this - which may be because I only came from the UK two years ago. In the UK you can just buy a farm and sell off registered titles to parcels of it to buyers on the basis of hope value as there is no control of subdivision - generally it's a scam, see http://www.learnmoney.co.uk/advice/advice-87.html.

My [limited] understanding of Aussie law is that you need consent to subdivide and without such consent you cannot register an ownership of the part you have 'bought'. If you buy one of these options is it registered against the title of the land in question, or do you just have a contract with a company that could just go broke leaving you with nothing?

Have they had a land surveyor draw up a master plan for the 1500 lots? If you were to proceed would you be buying an option on an explicitly delineated piece of land? If not, what are you buying? And if they are not going to be able to apply for subdivision consent until ten or so years what happens if the planning policies in force then require 400m2 or 600m2 blocks and your part has been laid out with 500m2 blocks.

I have fallen for the Central Equity spin in the past but this one looks really dubious to me.

T.

 

[landlubber]

Don't do this !!!

Jodie,
You're in Perth and you're thinking of buying land near Shepparton that may or may not be worth $270K in 10 years....and you're going to lock-up all your equity to do it. I'll be blunt... DON"T !!! This is high-risk "pie in the sky" gambling. It's certainly NOT investing. Read Jan Somer's books before you take another step.
LL

 

[jrc]

You need to do a lot of due diligence. The Council probably has reports and documents forecasting the expected population growth, preferred areas for new development etc. How many years will it take to sell 1500 lots.

Based on the Council's population estimates this would take 5 years to sell assuming there is no other development elsewhere.

 

[Piston Broke]

Last night I went to a 'free' seminar run by the 21st Century Academy about buying wholesale land. To sum it up, the Academy has bought a large amount of farm land just south of Shepparton VIC.

Lets get one thing straight:
They bought it wholesale, and selling it retail.
You aint buying squat wholesale.

They are selling options to buy blocks of land for when this occurs. The options cost max $22k per block and then no more to pay till the land settles in 10 years in which case it's expected the land will triple in value from $90k to $270k.

And what may "the land" actually be?
Without a detailed precise description this means nothing.

Hubby and I are keen as it all sounds good.

What sounds good?

and we probably wouldn't be able to sell before 10 years

Actually you dont even know if you can buy anything in 10 yrs time.

I thought that under FIRB rules you had to start building within a year? if you bought vacant land?

They are not buying anything, merely entering into a contract to buy something sometime in the future with some conditions.

 

[cdd]

Don't do this, regardless of what the salesman are telling you.

"Planned to be developed" can mean a lot...or very little indeed.

How is said land currently zoned?

The land is currently zoned farming, and judging by Amendment C93 to the Greater Shepparton Planning Scheme, most of it is not slated for rezoning or release until after 2031.

Have they had a land surveyor draw up a master plan for the 1500 lots?

Suggest you get a hold of this master plan (if it exists) and contact the company that prepared it to ask their opinion on what is being proposed. I also suggest finding out who exactly is doing the planning for the estate (rezoning etc) and contact that company directly to find out how it is progressing. You may in for a rude shock.

And what may "the land" actually be?
Without a detailed precise description this means nothing.

Tiny blocks (300sqm), about 10km south of the CBD. The last developer to do blocks of this size in Shepparton started building "The Channels" estate (Mozart Avenue area), and went promptly went into liquidation due to lack of demand. That estate was a lot closer to town than the land that they are trying to sell, so how do you think these new blocks will go?

Shoot me a PM if you want more details...