Tuesday, March 24, 2009

Thoughts On Land Banking

I have had friends who have profited from investing in land banking.

Still, I personally will not invest in land banking as I deem it too risky. It is only because it is such a risky investment that it can promise such high returns.

If it wasn't a risky investment, the land banking companies could have very easily gotten a bank loan and would not need money from investors like us.

It makes you wonder why they are not going to the banks for a loan when the opportunities are apparently so rock solid.

Perhaps one of the reason is that it is cheaper to get a loan from investors like us? But how can that be? Why will the banks not lend them money at a competitive interest rate?

The answer could simply be this: Land banking is too risky which makes it a business that even the banks are not willing to lend money too.

2 comments:

musicwhiz said...

If we take a 20% gain from Land Banking over 5 years, we end up with less than 4% gain per year. This compares even more poorly against equities which at least pay dividends.

Stooge said...

If its UK Land Banking plots you are more likely to see 90% loss. UK Land Plots sold in Singpaore are grossly overpriced (as much as 2000%) and none have converted for planning permission or show any sign of doing so. If you need to liquidate assuming you can find a buyer it will end up costing you more to sell the land than the price you can get for it.

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