Last Updated on 23, April 2014
There are many exotic investments that make your mouth water. One exotic is called Land Banking. I was approached by one land banking company to market their product and this is what I was told.
They told me that the land banking gives out 11% commissions! Of course the salesman do not get it all because he has to share with his team leader and the team leader has to share with his group manager and the group manager has to share it with the regional director etc. Anyway, the salesman can expect to get 6% in terms of commission. if his production is good he can be promoted and thus get a bigger cut in the commission.
The product is "insured" by an insurer so that if the maturity value fail to meet the intended return, the insurer will make up the losses. The insurer is some far far away country which I never heard of. I think I got more money than that insurer!
There is no guarantee that the product will mature. The project can be 1 year, 2 year (if lucky), 10 years, 20 years, 100 years, 1000 years. Nobody will ever know.
One significant problem with land banking is that the valuation of the lank is not transparent. So you never know whether the price you buy or sell is a fair price.
Finally, capital gain taxes and foreign currency risk can make your investments become very risky.
If you want to invest in land, it is better to buy a landed property in Singapore (free-hold preferably). At least you can see, call for a valuation and sell it all in Singapore.
For your information, land banking salespersons are mostly those who work in the insurance industry and IFAs. When I went to the company to hear them brief me, they told me that advisers from Great Easten, Prudential, IFA firms distribute their products.
Be careful whom you buy your product from.
Update 23 April 2014:
The Land Banking company has collapsed. The land banking company I am referring above is Edgeworth. See article: Former London politician Vaughan Minor, business partner point to mortgages placed on properties as root of financial loss.
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