Possible investment I could use input on...

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that1guy's picture
that1guy
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Posts: 333
Possible investment I could use input on...

Ok,  so I have a possible investment oppotunity that I am interested in, but am not sure of it is as good as it could be due to acouple of things.

The opportunity is in leasing ukraine farm land. My particular contract (which i have not sigend yet...have 21 days do look it over and make payment) is for 2.8 hectors. It will pay a yearly dividend of 30% of the profits off the yield (pre tax, so closer to 10-14% after tax), as well as any possible land appreciation which they put at 415% in 5 years (which I personally think is a high estimate). The consultant is saying that is based on the lad being cultivated and ready for planting, thus making it more valuable, but that is not my main reason for being interested in this. I am looking at the return off the yield (and believe that agriculture  is going to go up in price).

The questions I have are these....

The contract is for 15 years, and all monies are settled in dollars. I dont believe the dollar will be worth anything, or the reserve currency in 15 years. (if it is still here). On that note, if (more like when) the dollar is no longer the reserve wouldnt that throw a monkey wrench into a cotract like this? (see below for clause direct from contract)

4.3 Subject to the provisions of clause 4.7, if the Buyer agrees to pay the Cultivation Fee (and, if applicable, the Re-Cultivation Fee) the Buyer will not be entitled to use or manage the Land in any way and, provided the Buyer has paid the Cultivation Fee (and, if applicable, the Re-cultivation Fee), the Seller will procure that the Buyer will receive 30 per cent of the net income (excluding VAT) solely attributable to crops grown on the Land after deduction of all costs and expenses incurred in connection with the management, cultivation and sale of such crops for a period of 15 years from the Term Commencement Date (unless this Agreement is terminated before such time). Such monies will be payable by the Seller to the Buyer on an annual basis in US dollars within four weeks after receipt by the Seller of such monies from the Manager.

The second question has to do with what seems to be a clause that gives them a loop hole to not pay me even if the land prices to appreciate (even a small amount.....am i missing something?

whilst land prices may rise there is no guarantee that the Land Rights sold by the Seller will increase in value and no return can be guaranteed  from the Land Rights

 

The contract is fairly dry (as i guess they all are) but I would be happy to post the rest here if it would help....

 

Thanks ahead of time ,

Mike

ao's picture
ao
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Re: Possible investment I could use input on...

I can't imagine a riskier investment, if you can actually call it that.  Don't even begin to consider it. 

that1guy's picture
that1guy
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Re: Possible investment I could use input on...

Thanks for the response ao, would you mind giving me a little more  insite as to why you feel that way?

Does it have anything to do with the provisions i quoted from the contract, or is it simple because it is farming, or is it the other reason i had brought up above about the dollar...or a combo of all of the above?

 

Or is it because it is based out of the UK, but farm land in the ukraine.....

 

Thanks again...

ao's picture
ao
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Re: Possible investment I could use input on...

Gut sense secondary to decades of successful investment experience and navigation around such investment "icebergs".  There are WAY too many things that can go wrong.  The more complex any investment is, the more likely it is to blow up in your face.  It absolutely screams bad investment to me.  Quite frankly, it doesn't even sound like an investment, it sounds like a con.  This is not meant to insult you but quite frankly, if you even consider an investment like this, you need to have a serious talk with a good investment advisor ... and if your present advisor is recommending this, you need to run for your (financial) life away from him/her.

 

 

EndGamePlayer's picture
EndGamePlayer
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Re: Possible investment I could use input on...

Hi Mike - I'm with ao- sounds fishy. Why buy a farm and get $.3 an acre when you can make $500 or more. The idea that buying a farm when we are forcasting gas to be in the $10/gal range in the next few years would be financial suicide. And what makes you think land value is going to go up in value under the energy crunch conditions unless it's a transitional farm that runs with out energy - or at least low energy? Too many issues . . not enough fore-sight and prepared-ness to throw all your money in . .

IF you do this - please don't go in deep - find others who have a farming in the Urkrane background. EGP

that1guy's picture
that1guy
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Posts: 333
Re: Possible investment I could use input on...

energy, the econom, and the dollar are all very good reasons, as well as the main reasons I was second guessing this myself. Then I read through the contract, and came up with little tid bits like the ones I posted above.

If it helps my case any, I had absolutly no plans on the land going up in price at all. personally i was looking more at the return from the yield considering the possibilty that food prices are going to go through the roof is high.  In the same note, when gas and oil go up to then i guess there would be no difference huh.....tie that in with a falling dollar, and eventual loss of reserve status.....ya, maybe this isnt a good idea......

 

 

that1guy's picture
that1guy
Status: Gold Member (Offline)
Joined: Jan 11 2009
Posts: 333
Re: Possible investment I could use input on...

I see, this is good things to know. At least I can say my instincts were good enough to ask around/post here for more input. The two bits from the contract I posted alone was enough to make me step back a minute.

I guess I have a better potential for return by sticking with the garden at my house, lol.....

Thanks for the heads up, it is greatly appreciated.   (Cloud1fire.....this goes to you as well)

 

Thanks again.....

Cloudfire's picture
Cloudfire
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Re: Possible investment I could use input on...
that1guy wrote:

Thanks for the heads up, it is greatly appreciated.   (Cloud1fire.....this goes to you as well)

Wink

keelba's picture
keelba
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Posts: 55
Re: Possible investment I could use input on...

I know it is late and it sounds like you've been given enough information to formulate your answer but I want to add my own 2 cents to perhaps help you and others in the future regarding investing.

The first is: invest in what you know. Do you know anything about Ukraine land? Do you know anything about out of country investments? It is OK to invest in something you do not know about if you are allowed to be a part of the process and have some control in the direction of the investment. But if you have no idea what you're investing in, how to deal with the investment and what things to look out for or have any control in the direction of the investment vehicle, then you are speculating, not investing. Remember these words: "An investor makes money when he buys." You should NEVER, EVER buy something and then hope it goes up. An investor KNOWS it will go up.

The second: You should never invest in an idea, but rather the people behind it. All too often someone will invest in an idea because "the idea is so good, how could it not make money?". The greatest idea in the world still needs someone with brains behind it to make it happen. In this case, you're relying on someone in the Ukraine to make smart use of your money. Whether they are smart with your money or not does not change the fact that they have control of your money. Remember Bernie Madhoff. Then again, there have been many times where someone took an old idea and was able to make money from it because of their know-how, rather than the novelty of the idea itself.

Lastly: pay attention to history and compare it to today's enviroment. I would worry about moving my money out of the country at this time unless I was really sure what the government was going to do about it. I don't think there is anyone out there that doesn't think that times are still tough and likely to get tougher. Take a look at what the government of Argentina did to foreign investments during their crises. If you understand that and are comfortable with it, then by all means go forward. But if you have no idea what I'm talking about, then you need to educate yourself some (see point 1) before taking this kind of leap.

Investing is something everyone should learn how to do but always implies risk. You must learn how to manage your own risk to be a successful investor. If you do not know how then you must learn how or you WILL end up being the chum that the other sharks feed on.

Hope this makes sense and helps.

--Kevin

 

that1guy's picture
that1guy
Status: Gold Member (Offline)
Joined: Jan 11 2009
Posts: 333
Re: Possible investment I could use input on...

Thanks Keelba,

In no way do i consider myself to be a professional, but like I hinted at in a previous post, I do consider myself someone that does a bit of research before making a move of sorts.

I believe agriculture is deffinitly going up in value for sure over the next 3-5 years, but as I believe endgame pointed out, so will oil among other things which would potentially crowd out any returns I MAY get in an investment like this. Especially only getting 30% of the profit itself. Then seeing the clause I noted above, they dont even have to pay me if they dont feel like it (not a lawyer, but that is how I understand that clause...heck, that is how everyone I have shown it too in investing and otherwise understand that clause)...

Anyway, I do appreciate the input. It really does help. I believe there is something we can learn from anyone.....the best way is to ask.

 

Thanks again,

Mike

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