Land Syndicates

hey folks

wondering if anyone has invested in a land syndicate before?
what are the pros and cons?

Peet have a current Werribee (VIC) land syndicate on offer, I'm not from Melb so would like an opinion on demand for housing in Werribee

http://www.peet.com.au/PeetNational...h-Peet-Werribee-Land-Syndicate-March-2016.pdf

 

Not sure about the one you mentioned but in general be careful. Bigger ones like Waltons Landbanking are basically scams (do some google searches to see what they do).

On the other hand if you can form your own syndicate with a group of friends this might work well.

 

I have share in a land holding. It is about 40acres and I own about 1/8 of this. My family uncles/auntys set up a company and bought it like that.

The plan is for it to be rezoned from rural to resi. We will then sell it to developers.

It has a house on it that is rented. The money goes into an account and expenses are taken out.


Cons - I had to come up with a big deposit I could have used for other houses
- it's hard to get out of this sort of deal. I would have to sell my share to someone else.
- I can't lend against it. The cash is basically stuck there

Pros - are if its rezoned we will make a good profit and that's about it

 

Hi @stumpie , i am from NSW and looking to invest in Victoria. Please do let me know if anything else you found out!....i did read the report but this seems different than just investing in an IP.

 

your example of a land banking syndicate does indeed have some downsides but a syndicate set up to specifically develop is a slightly different proposition imo.

eg there will usually be a targeted end date to crystallise projected profits so even if that's inaccurate at least investors know the end game is to sell out, cash in and distribute profits accordingly.

with land banking there are much more unknowns, ie could it be 5 years? 10 years ? etc

like you said though potential profits are huge.

a couple of decades ago a group of people in perth put a syndicate together to buy some land down south, from memory 50k or so

in the end 1 guy kept his block for about 15 yeas and it was worth close to 10m.

 

@sanj
Have you had any previous dealings with development syndicates e.g. Builton or Match ?

I see their marketing literature quoting 20 to 24% annualised returns on capital do you know if they actually achieved these figures?

 

Demand for existing houses is pretty strong, you can probably do your own cecks on how many new houses sell in the area and close by, most new ones are small blocks or 300 or so odd m2

 

Potential profits are big or might not happen. It is setup as a trust/company and we have each bought shares in it. I don't expect anything to happen soon. But an investment firm did invest a lot of money buying vacant land so they have the same idea. Could be another 5 years until it is rezoned and then have to sell it which could take longer depending on the economy and other factors.

 

The JV's my clients setup run one of 2 ways:
1. Straight Profit Share
2. Set Return On Capital

Number 2 comes in around 12% if
1. no loan to acquire property; and
2. loan to develop not allowed to start until pre-sales of 100% finance cover are met.