Landbanking, is it a scam?
by Wendy Kwek
I have been offered by landbanking companies to ‘market’ the deals in UK, US, Canada and they offered me VERY HIGH commission but I have rejected them as I have one key objective in my mind. That is to help our investor group make money.
One of the landbanking companies’ CEO even shared with me how much I can make as their ‘Marketing Consultant’. He was a top executive of the ‘Well Known’ landbanking company and he started his own now. After I pressed him to share with me honestly when the land that he structured is likely to be converted or sold off with profits, he shared that it is very unlikely that the land would yield anything within the next 10-15 years. But, they told the marketing agents to sell it as a 5 year exit plan with capital protection. He went on to share how they would use the money to roll and invest elsewhere for 5 years or more and if there investors who complain or want their money back, they would pay back without the interest! I was told that after a long time, most of these investors would be happy just to get back their capital and not make a case out of it. I was very disgusted and left. There are many such scams around.
It is sometimes not the Marketing Agents fault that they are selling landbanking because they were painted a beautiful picture by the MANAGEMENT and given convincing marketing materials to sell. They too could have been conned. The companies would teach them how to sell and HOW TO PULL IN BIG NAMES LIKE THE BIG AUDITING COMPANIES OR PUBLIC LISTED COMPANIES WHO INVESTED etc. You must remember that Enron and many other big companies whom have questionable acctg also uses BIG auditing companies.
So like I have shared. Thanks to Google Earth and loads of info on internet. You can check the exact location and check the growth path of a land before buying. Pls do not think that $0.60psf is cheap. They could have bought it for only $0.01centpsf. that is 6000% markup. If you want to know the truth, ask the company to furnish you the documents of HOW MUCH THEY REALLY BOUGHT THE LAND initially. They bought it at wholesale, subdivide and sell you at retail. I dare to bet my last dollar that they will not show you the price they bought the land nor tell you the truth about how many times they mark up. It is the same piece of land with no valued added done to the land but sold out at different pricing.
If any company can offer VERY GOOD commission, you must know that the money eventually comes from investors. So, are they acting in your best interest or their own?
You must understand that there are many land parcels selling for a few thousand dollars per acre. When they subdivide it to psf, it is really very cheap. People in SG and Hong Kong are the two main countries where they solicit funds from as to us SG n HK look at land as PSF whereas land US, UK, Australia are sold on PER ACRE or even PER HECTARE basis.
One of the CEOs of a large REAL ESTATE agency was the first to represent the ‘Well Known’ landbanking company here and he stopped marketing it after realizing that it was mainly a scam. The landbanking companies can afford to use the tons of money raised to buy out and PAY OUT TO SMALL SAMPLING OF THE INVESTORS to make it look very profitable. When a small percentage of the investors were paid the profits, they leverage and SPREAD THE NEWS THAT INVESTORS HAVE MADE MONEY to draw in new blood. Some of these investors who exited with profits were convinced and plow in more money and even become agents to help the company bring in more funds.
I was told that the typical mark up price of land banking is at least 500% to 10,000% of original price.
I wish you all good luck with your investments…More feedback n sharing from those with experience in this welcomed.
Wendy Kwek
