What are the “red flag” problems to look for in potential strategic land investments?
A sucker is born every minute. But some of the scams in land investments are so obvious that the would-be investor taken in by them must be a sucker without web access.
In the 1980s an American company called Lunar Embassy embarked on its scheme to sell one-acre plots of land on the moon for approximately $20US per acre. Simply put, it was a strategic land investment scam that is out of this world. The company reportedly still thrives, legally, through Internet sales, claiming 2.5 million acres sold – despite the fact the United Nations prohibited states and individuals from owning extra-terrestrial property since 1967.
That noted, contemporary land investments on Earth can be just as dodgy and have been happening since long before human space travel. Perhaps this is due to the fact that great wealth has been built on fortuitous investments in undeveloped land (the 2012 movie “The Descendants,” starring George Clooney, uses as a demonstrative sub-text the great fortunes connected to ideally-situated, once-remote property). Or, it may have to do with the idea of hidden treasure. The best example might be the Oak Island Money Pit, a Nova Scotia (Canadian Maritimes) tourist attraction that has repeatedly drawn investors to buy and attempt to excavate sinkhole land in search of fabled treasures. The deep hole on Oak Island has yet to yield treasures but myth and tourism keep the dream alive.
These ventures into space and fantasy are relatively harmless compared to land scams that target unsophisticated investors. Operating within legal limits, many land banking companies use telephone marketing techniques to contact potential investors with offers that sound too good to be true – because in fact they are. The characteristics of these modern day rip-offs include the following:
• Land in a remote location, unlikely to be visited by the potential investor. Quite often the countries for these once-in-a-lifetime opportunities are Brazil, Cayman Islands, Costa Rica, Cyprus, Indonesia, Turkey or Ukraine.
• The land is truly in the UK (but will not likely ever be developed). In fact there is land that is well situated near population centres where development might seem logical. Except it may be on protected greenbelt tracts, or on a steep hillside or otherwise inaccessible to roads, rendering it highly unlikely to be developed.
• The land has explosive value-increase potential. The pitch is that planning permission is already guaranteed making it likely the underused farmland is about to become a five-star resort (often the pitch for sunny, seaside properties), or for a about-to-be-valuable agricultural crop (acai or cocoanut plantations in Brazil, or biofuel land in Indonesia, for examples). The investor has to ask, “if it’s such a good deal why are they offering it to anyone who answers a telephone?”
• The product being sold is exotic and exists only on paper. Sometimes land is just too simple for scammers and their prey, so instead worthless paper is created to sell carbon credits, diamond rights or options thereof. Sales people will assure their targets that the contracts are honoured by the “International Court,” as if such a thing exists.
• The investment will come with a 100 per cent or 1,000 per cent or greater “guaranteed return.” Who would possibly be so stupid as to turn it down? Other than the person who asks, “Why is anyone not simply hoarding this investment for his or her own gain?”
In fact, legitimate land investments are available, providing excellent capital growth for investors, in the UK. But such investments require very strategic approaches made by seasoned land investment professionals. Typically, a solid land investment will require a minimum of £10,000 and make no specific promise on the ultimate return on that investment (which would violate standard financial industry ethics). Before getting involved in any kind of investment, the investor is wise to discuss it with a personal financial planner who can provide an independent evaluation.