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Landbanking

Discussion in 'Innovative Techniques' started by MBowen, 29th Oct, 2015.

  1. MBowen

    MBowen Active Member

    Joined:
    12th Jul, 2015
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    34
    Location:
    Victoria
    Hi everybody. A fair few years back my husbands parents bought a few blocks of vacant land in Kellyville, NSW. I wasn't sure if this was called lank banking but essentially. They asked for a years settlement, paid the 20%deposit with it to go into a interest saving account with the profits split between both the vendor and purchaser and pre pay the agents commission so they earnt their crust. They also had a clause that they could on sell the property after a year if they pleased. The blocks had grown in value before the upcoming years end date they advertised them with a real estate and on sell them taking the profit but never physically owning the property. Is this called landbanking or even legal in this day and age. Would you just pay income tax on the profit and interest earnt back? obviously a very risky move but could work for regional hubs about to grow.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    18th Jun, 2015
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    9,020
    Location:
    Sydney
    Sure it is legal. Buying something and selling it at a profit.

    Not really landbanking if they don't take title, but it doesn't really matter what you call it. maybe 'flips' if they don't settle. 'Onselling' or 'subsale' are other terms. Tax on the profits.
     
  3. jpcashflow

    jpcashflow Well-Known Member Business Member

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    21st Jun, 2015
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    Location:
    Melbourne
    As Terry mentioned, sure is legal but I would not get into this...
     
  4. Xenia

    Xenia Adelaide Property Manager Business Member

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    4/136 The Parade Norwood, South Australia
    sounds like they did well
     
  5. albanga

    albanga Well-Known Member

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    19th Jun, 2015
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    1,117
    Location:
    Melbourne
    It's called flipping. Land banking is buying large lots of land with nothing around and sitting on it until it's worth something. Can work really well if you yourself live on the land and like the peace and quiet. My friends dad did this and after 20 years was engulfed with developers banging down his door with 20mil offers.

    Flipping is a strategy that can and has worked but requires a lot to go right including the vendor to agree to a LONG settlement. Works better in a cool market where vendors are desperate.