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Farmland prices surge: Should you invest?

The cost of farmland has been rising over the past decade and held its own during the recession. So why is farmland remaining so consistent and popular with buyers?

The Royal Institute of Chartered Surveyors has revealed in their most recent Rural Land Market Survey that the price for commercial farmland remains high, driven by increased demand and a continued lack of supply.

Over the past six months, 47% more chartered surveyors reported a rise rather than a fall in demand for commercial farmland. This was up from 31% in the previous half year.

Demand for residential farmland increased but not as sharply, with 14% more surveyors reporting a rise in demand rather than fall, up from 1% in the last half of 2009.

Prices are being driven up by both investors and lifestyle buyers. The demand from non-farmers is outstripping supply.

Even bearish market pundit, Marc Faber, who is nicknamed ‘Dr Doom’ for predicting the 1987 stock market crash, likes land. He recommended investing in farmland and gold in a speech he hosted in February.

Typically there are four main reasons put forward for farmland’s popularity (and it remaining reasonably unaffected by the downturn):

People speculating

Farmland is one for the speculators. People buy into farmland as they see prices rising, although they have no specific knowledge or reason to believe that the land will rise if value – it just does as other speculators buy into farmland.

Lifestyle buyers looking for the good life

Many people, especially City high-fliers, like the idea of buying into the ‘good life.’ These people like the idea of owning a bolthole from the urban environment – an emerald field in the middle of the country which they can call their own.

Foreign farmers buying UK land

British farmland has been relatively cheap compared to other nearby countries, such as Ireland and Scandinavia. This makes it attractive to overseas buyers. In 2008, 15% of farmland was snapped up by overseas investors. The majority of these buyers were from Holland, Ireland and Scandinavian countries. This means prices are pushed up as demand increases.

Inheritance tax benefits

Actively farmed land becomes free of inheritance tax after you have owned it for two years. If it is not actively farmed by you but by a tenant, it usually qualifies for a 50% capped reduction. Be warned actively farmed by you does actually mean you being personally involved in farming the land and agricultural buildings and farmhouses must meet strict criteria.

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So why have land values risen?

Sue Steer, of Rics, says: ‘The demand for farmland shows no sign of abating and it continues to outpace supply. As in the previous survey, we are seeing demand from farmers who are keen to expand their production, particularly into neighbouring farms.

‘Given the elevated prices at the farm gate, it seems farmers are willing to pay a premium in order to do so.

‘Farmland continues to be viewed as ‘recession proof’ and we are seeing UK and overseas investors purchasing commercial farms as an alternative form of investment which is outperforming other markets. These investors are competing with farmers and keeping prices high.’

A similar picture is painted by property consultancy Savills’ farmland arm. It says prices per acre have shot up by 120% over the past five years. Savills says the average price per arable acre has risen from £2,365 five years ago to £5,225.

Director Christopher Miles says: ‘Agricultural land is like gold, but with a cash flow as well.’

Should you invest – will prices keep climbing?

Looking ahead, surveyors expect farmland prices to continue rising over the next 12 months due to the imbalance in supply and demand. However, it is the commercial farmland sector which can expect to see the sharpest price rises, with 45% more surveyors expecting prices to rise rather than fall.

Investors, however, face a much tougher time getting into the market than they would do picking traditional investments such as shares and funds and land is an illiquid asset, so hard to sell up swiftly.

How you can grab a slice of the land

The difficulty in investing in a full working farm is cost. Experts say buyers are looking at around £3m for a decent sized farm, with farmhouse, buildings and machinery.

Most small landowners get started by buying land near their homes or a field for stabling horses. There has also been a rise in woodland ownership as people buy this as a lifestyle purchase. It is difficult to earn an income from land like this, however, its price should rise with the tide if farmland prices continue upwards. Experts warn that owning land comes with a responsibility for its upkeep.

If you do want to buy farmland, speak to a specialist – you could find one by contacting the Royal Institution of Chartered Surveyors. For those interested in seeing what sort of thing is out there, a good place to start is looking around on the website www.uklandandfarms.co.uk. It is important to make sure the land can obtain building permission and has other farming uses; otherwise the farm may be fairly worthless.

How not to invest – Land banking firms

Do not invest with a land banking firm, you are most likely being duped. Despite claims otherwise, the Green Belt plots that are sold typically have very little chance of receiving planning permission over the next 20-plus years.

Professional salesman will spin dreams to get you to buy, but don’t fall for it. This is essentially buying land and then dividing it into smaller plots, and selling for over-inflated prices. Don’t get ripped off and do proper research.

What next for farmland? what the experts are saying

The Royal Institution of Chartered Surveyors’ report said: ‘Looking ahead, surveyors expect farmland prices to continue rising over the next 12 months due to the imbalance in supply and demand.

‘However, it is the commercial farmland sector which can expect to see the sharpest price rises, with 45% more surveyors expecting prices to rise rather than fall.’

Christopher Miles from Savills in Norwich, said: ‘UK and foreign investors increasingly active seeing land as a safe haven, tax favourable and a hedge against inflation – ‘gold with a cash flow’; competing with farmers for quality and location and prepared to pay what it takes to get good commercial farms.’

A Mayell, from Fisher German LLP, in Worcester, said: ‘The supply of land is as tight as ever, but off-market sales have matched some of the demand.

‘Despite the constraints of the economic downturn and poor farming returns in some sectors, farmers and land owners continue to drive the market with strong support from agricultural lenders who recognise the strength of the farming balance sheet and have confidence in the industry.

‘The Budget, if anything, has thrown the advantages of land as a tax shelter into sharp focus and strengthened its value as a rollover haven.’

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By admin – August 28, 2010

Why Invest in Land?

Most people think that land investment is only for real estate developers, who buy big parcels of land for commercial, or residential development. But actually, investing in land is one of the sound investment strategies available for common investor, both large and small.

Reasons to invest in land

  • possibly higher profits
  • less risk - imagine your land got hit by a bomb, it is still a land anyway.
  • greater flexibility for maximizing value - you can plan your dream project on it.
  • easier and simpler investment management
  • land is real – it is tangible, can be visited, seen and walked on
  • land is a finite resource
  • land increases in value due to demand outstripping supply.

Land changes in value simply due to the whim of mankind. When the local authority suddenly approve a new project on an abandoned land, it could becomes worth over 10 times! What other investment could possibly achieve high return at no extra cost to you at no risk?

There is a simple piece of advice I got from my uncle in Johor. He invested heavily in palm oil estate. He hinted me that when human population is getting bigger, and global warming increases the sea level, the remaining land will become less and less on earth over time. Buying a land as a long term investment is definitely worth it. This is a direct logic which is very true.

Land Valuation

Compared to houses and commercial buildings, land is much trickier to value because its values varies greatly by what it can be used for. Historically, there is a formula which is that of the houses selling price, 1/3 was the land cost, 1/3 was the building cost, and another 1/3 was the cost of marketing, overheads and also profits.

Recently, with house prices spiraling upwards, plus the competition amongst developers, the profit margins have been reduced from time to time. You will most likely find the formula had changed. For example:

Buy a land, must remember these:

  • always buy freehold unencumbered land (free of mortgages, caveats or charges).
  • always get the land registered in your name with the government land registry office
  • get 100% ownership of the plot and full legal ownership, with the ability to sell it at any time to whomever you want and at any time or price you desire.
  • settle for nothing less, any doubts of fancy clauses just walk away from it.

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By admin – August 28, 2010

MCM Group and Swiss Capita join forces for European land and infrastructure investment

MCM Group in conjunction with Swiss Capita are proud to be marketing over one million square meters of land in a project which is set to become one of the foremost logistical and business hubs in Southern Europe.

This ground-breaking development has High Speed Train (AVE) and freight connections inside the project, as well as immediate Motorway access to two major International Airports and is within one hour’s drive of one of the top three Sea Ports in the Mediterranean.

The site was purchased over three years ago and during this time it has undergone exhaustive studies by more than 36 professionals in different fields. This synergy of a strategic communication intersection, a location which is unique and an innovative complex which is unequalled in Europe, has been studied and proven by this world class professional team.

Everything from environmental impact and water confederation to economic feasibility and socio-economic justification has been proven. There are many factors which ensure that this development will be a major success and these include:

• Social justification – Creation of more than 4,000 jobs
• Unequalled communication links and a unique location within Europe
• Due to its innovative concept, it is an important alternative for economical growth in the area
• Unique logistical solution on the intersection of two main European Freight Transportation Systems
• Demand for Industrial land and prices have remained stable during the recession
• It has been declared by both local and regional authorities as being a priority project within the territorial strategy of Castilla La Mancha.

Details can be found on the website at: http://commercial-land.fairdealinvest.com/


# # #

MCM Group is a consortium of companies providing marketing and business consultancy to the following since 2009:

www.distressedinvest.co.uk

www.stayoverseas.com

www.kptsocialmedia.com

www.thepixelway.com

www.languageopenlearning.com

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By admin – August 25, 2010

Why Invest in Commercial Land?

No one puts it better than American literary great Mark Twain when he said, “Buy land, they are not making it anymore.”

Land investment is one of the most stable medium to long-term investments that you can ever find. Gains from investing in land are plain to see. Besides being a very tangible asset that you can see and use, land values rarely depreciate. In contrast to property prices, land value has increased by over 800% in the past two decades. Furthermore, European laws permit any nationality to purchase land.

Prices of land are on a continued hike and experts predict that it will only continue to soar. Many investors are now seeing land as a much better investment offering greater returns compared to property or the stock market. Now, more than ever, is the best time to invest in land.

Commercial land prices are rapidly increasing. Despite the increase in interest rates, some commercial sites are selling at up to 20% above the asking price. Most of these sites are small brownfield plots and neglected former industrial sites. Despite the often derelict condition of these lands, small sites are selling very fast due to the fact that there are not many of them around as of the moment. Most of the buyers of these types of land are small businesses, which have now seen the investment potential of land as an asset.

Land has always been – and still is – one of the best forms of investment. Land is a finite resource. Land supply will eventually run out and prices could skyrocket. Since it is a tangible investment, you can always make use of land – whether for raising crops and animals, starting a business or building your home. Lastly, investing in land is solid and easy to understand. Compared to investing in precious metals for example, land prices are very transparent and it is very clear when the prices are going up or down.

For land investments in Spain visit:  http://commercial-land.fairdealinvest.com/

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By admin – August 25, 2010

Commercial Property Investment

Property has long fascinated private investors. Unlike many other types of investment, such as shares and bonds, property is a tangible asset: if you own a property – or a slice of one – you can go and see your investment. Bricks and mortar are just that – not ephemeral pieces of paper that could lose their value overnight. While property valuations can fluctuate, the property is still there. Many private investors feel that they understand property better than other assets, if only because they have the experience of buying their own homes. This, however, can be a dangerous assumption.

Major institutional investors, such as pension funds and life insurance companies, do not have the same view of property as most private investors. First, institutions make a sharp differentiation between commercial property and residential property. As a general rule, only commercial property is of interest to UK institutional investors. Residential property ownership is regarded as having much heavier administrative overheads than commercial property, as well as greater political and reputational risk.

Secondly, from the early 1980s to the turn of the millennium, property investment had been an unfashionable area for the institutions. In the 1980s and 1990s, institutional investors generally reduced their exposure to commercial property. For example, 20 years ago the average commercial property holding in pension funds was about 13% [a]. By 1999 the figure had fallen to just 4% [a], the same as the average cash holding. It was not so much that property was an unattractive asset category, rather it was that shares – both in the UK and overseas – seemed much more attractive. In the booming equity markets of the last two decades of the 20th century, what is now seen as the relatively stable performance of property was then viewed as just plain unexciting. Looking purely at annual returns, UK equities outperformed UK property in 15 of the final 20 years of the last century [b].

The institutions’ stance towards property has changed considerably since stockmarkets took a turn for the worse after the technology bubble burst in 2000. Property has been rediscovered as an investment category in the wake of tumbling share prices. By the end of 2004, the average pension fund’s property holding had risen to 7.0% [a]. Other factors have also helped to increase interest in property investment.

Historically low interest rates have made it possible for investors to fund their property purchases largely through borrowing: the rent received has often more than covered the interest payable. For those not wishing to borrow, the high income yield from property is a major attraction.

The government’s proposals to introduce a new form of property investment vehicle to the UK, the Real Estate Investment Trust (REIT), have also raised the profile of the sector.

Whilst the proposals are moving through the consultation stage, it is believed that the assumed tax efficiency of REITs has the potential to broaden the range of investors in property and transform the property company sector of the stockmarket.

For both institutions and private investors, commercial property is now an investment category that cannot be ignored.

For information on commercial land investment visit http://commercial-land.fairdealinvest.com/

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By admin – August 25, 2010

Moringa Reignites Agriculture Business

Recent News from Business Mirror reports on new investments into Moringa by large Agricultural Firms. These large companies are affiliated with the Department of Agriculture in the Philippines in conjunction to bring an end to the poverty driven societies. Below is an excerpt from Business Mirror, ”

PILI, Camarines Sur—The Department of Agriculture (DA) regional field unit (RFU) for Bicol is grooming the province of Camarines Sur as the leading producer of malunggay (horse radish or Moringa oleifera) in the country under the agency’s accelerated hunger-mitigation (AHM) program launched here recently.

Jose Dayao, the DA-RFU executive director for Bicol, said on Tuesday growing malunggay on commercial scale is a strategy being applied by his office to address malnutrition in Bicol apart from the economic returns that await growers.

“We are transforming this once ‘lowly crop’ into another major crop of Bicol, and grooming Camarines Sur as its top producer to supply some food enterprises now processing malunggay into several nutritional and pharmaceutical products,” Dayao said.

Although this crop is also widely grown in Albay and Sorsogon, Dayao said Camarines Sur had the biggest potential of producing it on a commercial scale due to the availability of wide spaces for plantations.

Apart from its importance as a green-leafy vegetable that offers great nutritional value, malunggay leaves are now being used as a raw material in the processing of tea, polvoron, cookies, pastilles, pan de sal and powder that have been gradually gaining demand in the local market, Dayao said.

“Taking a second look at this evergreen tree bearing small leaves, however, would lead us to a reality that this very ordinary vegetable is packed with essential vitamins and minerals that our body needs,” Dayao said,

Fresh malunggay leaves are rich in vitamins A, B and C, calcium, potassium, protein and iron. Studies showed that malunggay gives a feeling of wellness and balances sugar and cholesterol in the body, Dayao said.

Its elongated pods, whether young or mature, are cooked with other vegetables in a popular Ilocano dish called dinengdeng.

Leaves can be prescribed to treat anemia. Dubbed as a “miracle vegetable” or “the power gulay [vegetable],” malunggay is now being processed as a food fortifier, food supplement and even potent medicine, he said.

Ralph Camelo Mariano, the technical specialist in charge of malunggay in the city project of Nabcor, said malunggay leaves are rich in vitamin A higher than carrots; its vitamin C is higher than calamansi, calcium higher than milk and protein higher than meat. Malunggay seeds are also a good source of high-value oil.

Seeing this great agribusiness potential of malunggay, Dayao said Agriculture Secretary Arthur Yap urged agriculture stakeholders to increase the production and diversify the uses of this vegetable to help fight hunger and malnutrition, especially in the rural areas.

For its part, the Bureau of Agricultural Research has included malunggay in its indigenous plants for health-and-wellness program and identified the development of its plantations as a priority project, Dayao added.

To further promote the program, Mariano said a Malunggay Congress slated on November 24 has been organized by the DA-RFU at the De La Salle University in Manila where all aspects of malunggay business, production and processing will be highlighted.”

For more information on alternative fuel investments visit www.moringabiodiesel.fairdealinvest.com.

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By admin – August 25, 2010

Brazil increasingly seen as real estate investment hot spot

By Property Wire

Brazil is seeing a shift from lifestyle property buying to investors seeking a purchase that it likely to rise in value as the country hosts the football world cup in 2014 and the Olympics in 2016, it is claimed.

Once the secret of a select few adventurous holiday home buyers attracted by the year round sunshine, deserted beaches and party atmosphere, Brazil is now topping the list for serious property investors who wish to cash in on the boom, according to Brazil real estate specialists uv10.

‘Initially our client base was rather lifestyle heavy, but we’re now handling more and more pure investors. They can envision the impact of the 2014 FIFA World Cup and the 2016 Rio Olympics, not to mention the burgeoning middle classes and the recent introduction of mortgages for Brazilians,’ said uv10 sales manager Samantha Gore.

‘We’re here to advise on the best areas to invest in at any given time and right now land values in parts of Brazil are soaring. With available plots starting from 54,705 Brazilian Reais, around £20,000, for a little over 500 square meters they represent excellent value,’ she added.

The Brazilian government is also putting more effort into attracting foreign real estate investors. ADIT, the Association for inward investment in real estate and tourism, has announced that it is widening its influence to cover the 27 states of the whole of Brazil and not just the nine states of the Northeast region.

As a result is name has been changed from ADIT Nordeste to ADIT Brasil and it will also broaden its fields of activity to include residential and commercial property based investments, hospitality, real estate tourism and logistics.

The organisation will also strengthen its presence in the environmental sector, with the aim of creating legal security to advance real estate and tourism developments across the country.

The announcement comes exactly four years after the Government funded Association was founded. It was formed in June 2006 in order to drive forward the Northeast’s tourism and real estate development. Before then, there was no official body representing the interests of these sectors.

ADIT Brasil attracts foreign direct investment in land and real estate projects by introducing the most reputable Brazilian developers, architects, lawyers and related businesses to international investors including hoteliers and resort groups and encouraging the formation of working partnerships.

The association holds an annual conference, exhibition and business networking event called Brasil Invest (formerly known as Nordeste Invest). The event has become a milestone in the industry. Its fifth conference in May 2010 in Natal it attracted more international investors than ever before. Some 120 foreign investors attended and met with Brazilian companies in the real estate and tourism sectors, with parties agreeing an anticipated R$ 1.8 billion of business.

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By admin – August 16, 2010

Shell dumps wind, solar and hydro power in favour of biofuels

Shell will no longer invest in renewable technologies such as wind, solar and hydro power because they are not economic, the Anglo-Dutch oil company said today. It plans to invest more in biofuels.

Executives at its annual strategy presentation said Shell, already the world’s largest buyer and blender of crop-based biofuels, would also invest an unspecified amount in developing a new generat­ion of biofuels which do not use food-based crops and are less harmful to the environment.

The company said it would concentrate on developing other cleaner ways of using fossil fuels, such as carbon capture and sequestration (CCS) technology. It hoped to use CCS to reduce emissions from Shell’s controversial and energy-intensive oil sands projects in northern Canada.

The company said that many alternative technologies did not offer attractive investment opportunities. Linda Cook, Shell’s executive director of gas and power, said: “If there aren’t investment opportunities which compete with other projects we won’t put money into it. We are businessmen and women. If there were renewables [which made money] we would put money into it.”

Shell said biofuels fitted its core business of providing fuels, logistics, trading and branding. Cook added: “It’s now looking like bio­fuels is one which is closest to what we do in Shell. Wind and solar are interesting [but] we may continue to struggle with other investment opportunities in the portfolio even with big subsidies in many markets. We do not expect material investment [in wind and solar] going forward.”

The company also confirmed that it would increase its dividend payments this year by about 5% to $10bn.

Friends of the Earth (FoE) criticised Shell for freezing investment in renewables such as wind in favour of biofuels. “Shell is backing the wrong horse when it comes to renewable energy – biofuels often lead to more emissions than the petrol and diesel they replace,” the campaign group said.

Until recently, Shell’s investment in wind power featured prominently in its corporate advertisements. FoE said the company’s move heralded a slightly more honest approach. “Shell is at least being a bit more honest about the fact they are a fossil fuel company. It has seen the limitations of the greenwash it was putting out a few years ago.”

Shell has about 550 megawatts of wind farm capacity around the world, enough to power a city the size of Sheffield when the wind blows. Last year, it pulled out of the 1,000MW London Array project, the joint venture to build what would be the world’s largest offshore wind farm, in the Thames Estuary. Former project partner E.ON has yet to decide to continue with the £3bn investment needed.

Outgoing chief executive Jeroen van der Veer admitted that the company had suffered some “technology baths” in the past when it backed unprofitable technologies. “We don’t do it [renewables] all.”

The company has predicted that by 2025, 80% of energy will come from fossil fuels and 20% from alternative energy sources. Yet it is spending just over 1% of its budget on alternative technologies. Over the past five years, only $1.7bn of the $150bn it has invested has gone towards alternative energies.

Cook pointed out that at one stage the company only invested 1% of its budget on liquefied natural gas, which is now a big part of its business. “You have to start somewhere,” she said.Van der Veer also admitted that Shell’s overall R&D budget would “fall a bit” as the company focused on the most promising technologies and in the wake of the oil price slump.

The company said it would raise debt levels to maintain dividend payments and its spending programme. Van der Veer insisted that energy demand in the long term was strong and oil prices would recover. “The problem is you don’t know when the long term starts.”

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By admin – August 15, 2010

Making a solid Brazilian land investment

In the early years of the 2000 millennium, the Brazilian economy was still a question mark, and was perceived by many as a risky country for real estate investments – today, all that has changed and the first investment wave has given way to a second wave of land speculation- so follow our tips to investing safely in Brazil…

Ten years ago, the majority of property investors focused on other markets. Many European markets were witnessing a real estate boom rarely seen before in history, and countries like Spain, Portugal and France saw a large influx of foreign buyers looking for holiday homes in the sun. Along with the growing popularity, the cost of coastal land in these countries increased rapidly as well, and many savvy developers started looking at new areas for land banking investments where they could invest part of their profits.

One of these new areas that caught the interest of property developers was Brazil, and especially the coastline in northeastern Brazil. In those times, foreign developers perceived cost of land in Brazil as very low, and an increasing numbers of foreign developers started to invest in large pieces of Brazilian coastal land for land banking purposes. Many applied for building permissions for beach and golf resorts on the acquired land, and even though some did so with the intention of actually developing future beach resorts, this was mainly done in order to add value to the land.

This “first investment wave” consisting of mainly land banking investors, usually happens in the very early stages when a destination is perceived as having future real estate potential. Brazil has long been seen as a promising future market for holiday home buyers, and the lank banking phase usually takes place long before the actual end user market starts to invest in properties in the area.

In recent years, a “second wave” of land speculation has been taking place, where foreign owned groups have acquired land parcels in mostly deserted areas along the coastline in northeastern Brazil. Typically the land developer splits the land in smaller lots of around 500m2 and markets these for prices that seem appealing to novice land investors with little know-how of Brazil. However, investors are advised to learn about the real market fundamentals before making any investment decisions.

Demand drivers for land in Brazil

Moving on from speculative land banking, most end users buy land in Brazil either for residential living or holiday home purposes. In each scenario the demand driver is the end-user market that has a real need and desire for a property in the area.

There have been several very successful residential plot projects from large developers in Brazil. In these projects the land developer typically sources large land parcels in the outskirts of the state capital, puts in infrastructure and facilities, and then their clients can build villas themselves on the plot. Prices of these plots are usually around 400-1000m2 in such developments, and are often sold for over 50 000 -100 000 Euros. These projects are often sold out long before the first houses have been built. The primary reason these projects sell out so quickly is that they fulfill a “real” demand, as the Brazilian population wants to live in an area that offers excellent infrastructure with easy and quick access to the city.

The second type of end-user who buys land in Brazil does so for building a property for holiday purposes. In this scenario, the end-user is interested in an area that offers a good holiday experience. This often means that the area, in addition to having beautiful beaches and nature, also needs to have infrastructure and amenities in place, like shops, bars and restaurants -otherwise the area will not be appealing to holiday buyers. The primary reason plots sell in these areas is that they fulfill a “real” holiday demand, as Brazilians and foreigners alike, want to have a property in this type of location.

Not all areas fulfill the holiday demand criteria

By studying the coastline along the coastline in northeastern Brazil a bit closer, it quickly becomes apparent that not many coastal areas actually fulfill this real holiday buyer criteria. Many areas in the northeast of Brazil are extremely undeveloped, and offer very little if any, infrastructure. In these areas, it could take well over 10-15 years before progress eventually comes their way, and they actually start to offer some kind of end user real estate demand.

Buying a piece of land in such an area is similar to gambling, as there are too many uncertainties, and it could well be that the area remains deserted for a very long time.

Some areas, though, have taken a different route, and have developed into popular holiday coastal villages with nice infrastructure. Among the most famous ones in northeast Brazil, are areas like Praia da Pipa, Porto de Galinhas, Arraial D’ajuda, Trancoso and Itacaré.

Don’t focus only on cost of land – Think about the potential sales price of a finished property on the land.

One of the biggest mistakes many foreign land investors make is that they only look at the price of the land. In order to illustrate this point, let’s look at a very simplified example of two different scenarios:

An investors buys a 500m2 plot in a deserted beachfront location for 19 900 Euros. He then decides to build a villa of 200m2 on the plot, for a total cost of 500 Euros/m2. Total build price comes out at 100 000 Euros, and including the price of the land, the total amount invested is 119 900 Euros.

The investor buys a 500m2 plot in an area with an existing tourist market for 50 000 Euros. The plot is not beachfront, but it enjoys a nice setting and is close to the beach. He then builds the same villa of 200m2 for 500 Euros/m2, and the total investment comes out at 150 000 Euros.

Many novice land investors will think the first scenario is a better land investment. The fact is, however, that cheap land tends to be in deserted locations with very little interest from a tourist point of view. The area is probably not very popular, and it is likely that the investor’s house has no appeal to any end-user buyer. In this scenario, the likely outcome is that investor will not be able to sell the house, or the plot, because there is no demand. In this scenario, even though the 500m2 might be bought for 9000 Euros, it still would not be a good investment.

The second scenario is completely different. A 200m2 house in a desirable location will always attract end-user clients, both for sales and rental purposes. Properties in highly desirable locations do not need to be beachfront either, as the area will offer many other attractions. The investor could probably sell the house for a decent profit, as the end-user market sees value in the property because of its location in a highly desirable area.

This is obviously a very simplified example, but it does clearly illustrate the importance of location. Unfortunately many novice land investors tend to only focus on a low purchase price for the land, and they forget about real investment fundamentals.

Summary:

When buying land in Brazil for investment purposes, it is very important to first ask yourself what makes the piece of land attractive for future buyers. Secondly, it is important to understand why a client would buy the land from you at a higher price than you initially paid.

It is easy to be lured by the cheap land prices being marketed by opportunistic land developers, but this can lead to you making the wrong investment decision. Land investing in Brazil can be very profitable, but instead of searching for cheap land, it is wiser to look for good value in an already popular area with existing end-user demand. Buying Brazilian land in a good and popular area, will assure that you have an exit strategy for your land investment in Brazil.

Useful Links

http://fdi-ecocitybrasil.com/

http://white-sands-brazil.fairdealinvest.com/

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By admin – August 15, 2010

Timber Investments: Why It’s Time to Knock on Wood for Profits… Literally

If you’re not following the money into timberland, you should. Here’s why… Timber Investments has outperformed the S&P 500 since 1910.

In recent history, timber has outperformed the market significantly. Since 1987, the NCREIF Timberland Index climbed by an average of 15% per year, compared to roughly 11% for the S&P 500. Such strong out-performance boils down to one factor – biology. Biology accounts for 65% to 75% of timberland’s performance. Nothing can stop it from adding to the value of timberland investments. Come rain or shine, trees grow. And so does their value. By an average of 2% to 8% per year, in fact.

Not even natural disasters can undermine timberland’s value, because companies can still sell damaged timber. For example, after Mount St. Helens erupted, nearly 80% of the scorched timber was still suitable for sale. Bottom line: Timberland is one investment virtually guaranteed to increase in value. And who doesn’t want that?

Two More Compelling Reasons to Own Timberland

  1. Inflation: Timber is a natural hedge here. Real prices for timberland have risen steadily for more than 100 years. Even more attractive: During the last bout of runaway inflation (1973-1981), timberland was one of the top-performing hedges, increasing by an average of 22% per year.
  2. Portfolio Diversification: This is the most compelling reason to become a tree-hugger. Timberland sports a very low correlation with most asset classes – less than 0.1. Accordingly, adding timber to a well-diversified portfolio enhances the return potential, while reducing risk.

And with the market fighting significant headwinds – high unemployment, a comatose real estate market, weak consumer spending, runaway deficit spending, a potential credit-induced bubble in China, and a looming debt crisis in Europe (to name a few) – timberland could be the only asset to rise above it all.

That’s not mere conjecture. History proves it…

Timber investments ranks as the only asset class to deliver positive performance in four out of the five major market collapses – including 2008. While the S&P 500 tanked 38%, timberland rose by 9.5%, based on the NCREIF Timberland Index.

Visit www.timberinvestment.fairdealinvest.com

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By admin – August 12, 2010