Any experience with Land banking?

Leveraging, renting vs owning, making an investment or buying a home?
retireat50
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Any experience with Land banking?

Post by retireat50 »

Just wondering if anyone has ever had any experience in investing with a land banking company. Some big ones in Canada are Walton and S&D here in Edmonton where I live. Essentially a pool of investors purchases large tracks of land and sits on it for 5+ years and then sells once development comes close to the area.

I've looked at S&D closely on their website and all of their projects have garnerd minimum 20% return per annum, but of course Alberta's economy is booming here. The downside is that the investment is normally very illiquid and it could take longer than anticipated to find a buyer if things slow down. This is not really something I"m considering, but I"m curious if others have gotten involved with this.
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AltaRed
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Post by AltaRed »

The returns are higher because risk is higher. What happens if Alberta's economy freezes in its tracks because Ottawa does a number on the O&G industry? Or commodity prices fall back substantially?

You may be interested in the Moneysense Forum thread on Land Banking here
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Canyon Acquisitions/HEIR who are they?

Post by searchr »

Does anyone know Canyon and their DR/ Belize projects? Is there a connection with James Catledge and or Elliot?

Any info would be appreciated.
Thanks.
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Post by kombat »

My wife and I participated in a Land Banking venture with Syndication and Development (S&D International) in 2006. We purchased 4 units, for a total cost of about $77,000.

We're still waiting for the land to complete its cycle and realize our profit, but out of curiousity, I did some digging and came up with some disturbing numbers.

The plot of land we invested in is in Leduc, Alberta. S&D bought the land from a farmer a year earlier, for about $2.2 million. They then chopped it up into about 440 units, and sold them to developers like us for about $19,000 each.

Do the math. S&D paid $5,000 for each "unit", then turned around and sold each "unit" to us investors for $19,000, less than a year later. So they made a fantastic return on their money. Time will tell if us investors will make a profit anywhere in the same league. At this point, I'd be content to just break even.
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Investing with S and D International a good idea?

Post by searchr »

Anyone know anything about this company based in Edmonton Alberta?
They are primarily dealing in real estate.
Thanks
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Norbert Schlenker
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Post by Norbert Schlenker »

kombat, it's good to see you again. You might consider helping searchr out. Or maybe you can sell him your share. ;)
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Post by zaman »

Norbert, you are one funny guy! I must say, I really feel sorry for this guy though. We've all made mistakes as investors, some more than others. I lost quite a bit of money in the tech wreck (that was when I was a "momentum investor"). My second major mistake was investing in a labour sponsored fund called the Working Opportunity Fund in 2001...basically, after factoring in my tax credit I sold it 8 years later with zero return. ( you needed to hold it for 8 years to keep the tax credit)

But Kombat, you may feel better knowing that many people end up making bad investment decisions (especially early on), and many can recover, but the key is

1) learning from your mistakes
2) learning the easy way from others
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Post by kombat »

zaman wrote:Norbert, you are one funny guy! I must say, I really feel sorry for this guy though.
But Kombat, you may feel better knowing that many people end up making bad investment decisions (especially early on)
Thanks, Zaman, but I'm not yet convinced I've made a huge mistake. That is, I don't believe I've blown $77,000 that I'll never see again. I'm confident I'll get at least some of my money back, and hopefully even still profit some. As I said, I did a title search, and my wife and I do in fact own the land in question (1 acre in Leduc, next to a golf course and the highway). S&D is a real business, operating globally for 7 years now. Other forum members who live in the area tell me they see S&D signs all over the place, so they do exist and are active in land development. I'm still hopeful that there's some profit in this for me.

That said, we definitely won't be doing it again. I don't like that we were mislead about the land's value and used for an immediate 400% profit for S&D, I don't like not knowing how to value this asset in my monthly net worth statements, I don't like the lack of liquidity, I don't like being overinvested in real estate, ... there are a lot of things about this deal I don't like. But I'm not yet ready to believe I've lost $77,000.
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Post by Flights of Fancy »

$77K plus all your fees to participate plus the risk-free return you could have earned over the same period.
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Post by kombat »

Flights of Fancy wrote:$77K plus all your fees to participate plus the risk-free return you could have earned over the same period.
What can I say. Live and learn.
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Post by active »

Kombat,

what is the land assessed for and how much is the annual property tax?
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Post by Flights of Fancy »

Hi - I wanted to apologize if my last post seemed overly brusque. I posted very quickly, without taking time to add anything to my one-liner.

I often think that if I had a magic wand and had the power to implant just ONE idea in the heads of my peers w/r/t money and finance, it would be "opportunity cost." I find myself often mentally calculating and pondering opportunity costs -- and I did that with your post, then wrote it out, but didn't really think how that might look on screen.
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Post by gossg »

I am a member of two real estate syndications. One of them, a buy'n'hold office building, appears on the city's tax rolls for about half of what the syndicate paid for it. I presume that the promoters flipped it to the syndicate at 2 to 1 for their personal profit.

The other one, a farmland-to-building-lots development by Shire is currently in limbo. The Alberta Sec Commission has issued a stop order and a large group of members have launched a class action suit against Shire. This property doesn't yet show on the Web-based tax assessment property value lookup for my city.

So, high return and high risk. I took my chances and don't know yet whether I've been ripped off -- it looks like it.

The thread started asking about Walton. A friend of mine had an investment in a Walton syndication purchased on her behalf 19 years ago. It paid out last year at a compounded rate over 20%. So these sometimes work. But it made a real mess of her taxes for 2008.
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Post by worthy »

About ten years ago, my mother sold a lot in Bozeman, Montana. It was originally purchased in the late 19th Century by her maternal grandfather as an investment in what was then barely a village of less than 3,500. The lot was in the Rainbow subdivision. When it was sold a century later, it was amidst junkyards and fetched a whopping $10,000. Some of great grandpa's other investments worked out a lot better. Unfortunately, many were seized by the State for "public works."
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Post by couponstrip »

Do these real estate companies really know which direction a city is going to grow? They buy a piece of land in hopes that it will become valuable many years from now. It would seem to me that some of these purchases (maybe a lot of them) won't work out in our lifetimes simply because the city growth will take place elsewhere, or provincial/municipal government meddling, environmental legislation (perhaps yet to be passed), or other complex barriers (many unforeseeable) will prevent growth in the direction of your land. Sometimes cities don't grow at all for long periods of time. Check out Regina or Saskatoon, or any city in Sask. Those cities probably haven't expanded beyond their footprint in 20 years.

High risk, plus a middleperson raking their take. If one wanted to take this kind of risk, perhaps they could just get together with a group of friends/associates and split the cost of something like thisclose to Barrie and hope that the city grows South towards your land sometime in the next 20 years. At least that way there would be more control, and you could drive out and walk your land from time to time if you needed comforting over the many years required for the land to become more valuable.
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Post by Nemo2 »

couponstrip wrote:Do these real estate companies really know which direction a city is going to grow?
Question is, are they 'real estate companies', or are they scam artists sales organizations who have simply chosen land as the vehicle for their racket?
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Post by queerasmoi »

All this tells me is that if I wanted fractional land ownership as an investment vehicle, I'd be better to use one with more liquidity and transparency such as an exchange-traded REIT.

(Is there such thing as an REIT that invests in agricultural land??)
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Post by blonde »

To predict the future, you need to create it yourself.

Needless to say, some 10%ers know 'HOW-TO' do this.

STUDY the SYSTEM...ya'lls won't believe what ya'lls cud learn.

as an aside... ALL wannabees are DANGEROUS.

as another aside...INVESTIGATE the Do-Gooders first.
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Post by worthy »

are they 'real estate companies', or are they scam artists sales organizations who have simply chosen land as the vehicle for their racket?
Kombat already answered that question: Quick flip to "investors" nearly quadrupling their original investment. Hey, somebody has got to be left holding the bag!
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Post by Nemo2 »

worthy wrote:
are they 'real estate companies', or are they scam artists sales organizations who have simply chosen land as the vehicle for their racket?
Kombat already answered that question: Quick flip to "investors" nearly quadrupling their original investment. Hey, somebody has got to be left holding the bag!
Rhetorical question......I already gave the answer....two years ago.
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Post by worthy »

I've lost my sense of irony.
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Post by Nemo2 »

worthy wrote:I've lost my sense of irony.
:oops:

(Hey...it's the first time....it could happen to anybody, y'know.) :lol:
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Post by Jack's Girl »

couponstrip wrote:Do these real estate companies really know which direction a city is going to grow?
I have no experience with land banks but in my village (800 people) I've observed the following:

We moved here in 1990. There was a piece of land at the entrance to the village (i.e. main st. & the highway) and a subdivision grew up there except for the corner lot. That lot was zoned highway commercial. Then it sat.

At the same time, the same subdivision had 20 more lots zoned. But that land never was developed.

About six years ago the corner lot applied for a site plan to be developed. The neighbours rose up and objected. Every last one of them bought their homes knowing it was highway commercial zoning but they objected at the thought of anything actually being put on the lot.

Shortly after, they started to formal objection to the subdivision site plan. Two of the streets from that were to join with their subdivision but they objected to the change in traffic patterns (won one case, lost the other) and they objected to their park being changed (it was to be a shared park with the new subdivision all along.)

The existing zoning and planning for all of this has been in place for the past 19 years. This gives you an idea of how terribly slow the process can be when you are on the outskirts of a city (technically, I live in the city of Ottawa but get almost no services from them.)

Perhaps in Alberta things move faster when it is in a boom cycle, but now that things are a bit bust, I'm not sure I'd count on any money from new development for a lot longer than 5 years. There's too much that can change in that time.

And that brings up my question: who owns the mineral rights to the land, and who shoulders the environmental responsibility for the land? In Ontario, I understand if you own the land and an old dump site or old farm fuel tanks are found on it, you are responsible for the cleanup. In a land bank, does that mean the 'owners' of the shares can be hit up for more money if there is a problem with the land that the province orders cleaned up?
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Post by kcowan »

Raw land is alway a high risk investment. Sometimes it generates high returns. It is not for me.

If I wanted to speculate on land, I would buy multiple empty lots in a developing subdivision during a boom and unload them during the runup. Of course this will not generate a 10x return but it is a lot less risky.
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Post by nobleea »

Jack's Girl wrote:
And that brings up my question: who owns the mineral rights to the land, and who shoulders the environmental responsibility for the land? In Ontario, I understand if you own the land and an old dump site or old farm fuel tanks are found on it, you are responsible for the cleanup. In a land bank, does that mean the 'owners' of the shares can be hit up for more money if there is a problem with the land that the province orders cleaned up?
friends of ours live in Calgary (just south of the olympic park) in a newer subdivision. a couple years ago, a few houses in the area started sinking, and then a massive sinkhole developed on some driveways and the street. apparently, the houses were built over an old farmer's dump and it was filled in improperly. the city took care of it since they signed off on the development initially.
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