land banking

Haha, this one is strictly for those who are interested and know about this type of investment. Finally exited, after 6 years.

What is land banking? (dun quote exact, as this is from my own understanding!)
In lay man's term, a piece of 'raw' land (or agriculture land) was bought by this big company at a very cheap price and then they'll open up and invite investors to 'share' this land. Everyone gets a title deed etc. So after that, the process of land 'development' will be initiated. Means that the idea was to prepare documents, plan, design whatever, so that the piece of land or the area surrounding it will slowly be developed. Once that happens, the developers will be keen to take over this initial 'raw' land and to turn it into either commercial or residential areas. And once the price has been announced and where all the other investors agree to a certain percentage, the land will then be sold. Then each small investors will get their share. Minimum purchase at that time was half an acre but you can share with others if you like. So my brother's friend suggested to my brother and he was interested, so I follow.

That piece of land was at Canada, and the instrument during that time was, you pay the downpayment (a quarter of the purchase price and subsequently, you can pay via loan by morgaging the land). The finance company that provides the loan was the same one that sold the land to us. So, the interest for that was very very high. If not wrong, about 11-14%.

So, in year 2002 (I think la..) my brother and I paid SGD$3750 each for the downpayment. Then every month pay about SGD$180 each to service the loan. The interest are all calculated in Canadian dollars so, as the year goes by, Canadian currency grew so we actually paid abit more.

In year 2007, the land was sold. But everything was only finalized in year 2008. So we got our money back. After minus the mortgage loan payment and lawyer's fee, the approx. profit is about 6%. Ok bah? At least better than bank interest rates lor.

Nowadays, the investment mode has changed a bit whereby, the investor just dumps in $10K (in whichever currency of the land). For example, USD$10K will give you about 0.333 acre of land. The previous one was C$37K will give you about half an acre.