Cannabis

Concerning Cannabis

In 2012, the citizens of Colorado voted decisively to become the first jurisdiction in the world to allow legal adult possession, use, growing, and retail sales of cannabis (marijuana). Colorado has had legal medical marijuana since 2000. The 2012 amendment to the Colorado Constitution (Amendment 64) also set forth retail marijuana sales rules, a taxing structure that provides for revenue to schools, public and youth education regarding cannabis, and the production of industrial hemp.

Colorado became ground zero for cannabis reform and many other states and municipalities have since been looking to Colorado for guidance and example. Colorado citizens, in greater numbers all the time, have supported this groundbreaking change and the legislature, regulators, and industry have been working diligently to construct a business and legal framework within which to operate.

Cannabis reform is also sweeping the nation. Thirty-three states and the District of Columbia currently have passed laws broadly legalizing marijuana in some form, and the 2018 Farm Bill set the framework for legal industrial hemp nationwide. This movement will continue and the Federal government will catch up or be forced to approve and adapt in time as reform states lead the way. The latest Gallup poll on cannabis shows 66% of all Americans across the board support full legalization of this ancient plant. Canada has had legal hemp since the 1990s, and last year they legalized marijuana nationwide.

hemp

Colorado has managed this matter pretty well by writing good laws, monitoring the law’s status and effects, and adjusting regulations as needed to mitigate unanticipated issues for regulation and law enforcement while addressing the needs of the ancient industry. The entire conversation has changed in our state – fewer talk of fears and pot jokes and more talk of business opportunity. In short order, legalization has brought about normalization. For example, in Denver proper, there are more dispensaries than Starbucks.

Retail cannabis sales in Colorado began in 2014. Last year, the adult use (recreational) sales alone topped $1.5 billion, with tax revenues of over $266 million in calendar year 2018. Since 2012, the cannabis industry has created over 2,500 new jobs in the state; jobs that are home grown (pun intended) and won’t be exported overseas.

Colorado studies have shown little impact to law enforcement due to adult use, declining use by youth under 21, increased tourism, and tax revenues in excess of predictions. Appropriately, marijuana is regulated by the Marijuana Enforcement Division of the Colorado Department of Revenue and industrial hemp is regulated by the Colorado Department of Agriculture.

Other states have recognized the futility and costs of cannabis prohibition and are beginning to realize that it is a product that is best regulated, taxed, and properly controlled rather than treated as a criminal matter. Idaho, Kansas, Iowa, Texas, Nebraska, Wisconsin, and South Dakota are the remaining states that have resisted cannabis reform and several of those are either reexamining their status or have citizen-driven initiatives attempting to modernize the regulations in their jurisdictions.

Current legal retail marijuana sales in the US are approximately $6 billion. With recent legalization in California and Michigan, those figures are expected to grow exponentially. The estimated total marijuana demand in the US (including black market) is $50-$55 billion, which is the potential under nationwide legalization. The hemp products industry is hovering around $620 million and is estimated to exceed $5 billion by 2020. Clearly, this is an exciting growth industry with much opportunity. There are numerous impacts of the changing laws to the real estate industry, including land brokers, and it is a billion plus dollar industry that should not be ignored.

“Thirty-three states and the District of Columbia currently have passed laws broadly legalizing marijuana in some form, and the 2018 Farm Bill set the framework for legal industrial hemp nationwide.”

At some point, it is likely that we as real estate brokers in reform states will encounter a cannabis issue in the course of daily business. It could be an inspection issue for a home grow, a request for cannabis appropriate properties, warehouse or retail facilities, leases, hemp production farms and processing, or a myriad of other possibilities. Whether this poses a difficulty or an opportunity, you should be aware of the rules and regulations of the industry.

Hemp and marijuana are the same plant: cannabis sativa. The cannabis plant contains over 60 compounds known as cannabinoids which are unique to the plant. Hemp is a variety of cannabis sativa that contains less than 0.3% of delta-9 THC (tetrahydrocannabinol), the component of cannabis that produces the high from marijuana.

cannabis field

Hemp has been a historically important crop and was widely used in industry prior to being made effectively illegal under the Marihuana Tax Act of 1937 and rendered completely illegal under the Controlled Substances Act of 1971. Hemp has a long list of useful applications: fiber, cloth, paper, oils, plastics, lubricants, cosmetics, food products, bio-diesel and ethanol, insulation, and building materials. It has more than 25,000 documented uses, but will not produce a high.

Industrial hemp was first addressed in the 2014 Farm Bill, which allowed interested states to establish programs for research of propagation, growing, utilization, and marketing of hemp. The first seven states that chose to participate gained a head start in developing a robust hemp industry.

The 2018 Farm Bill, passed last December, made major changes to the law:

  • Defines hemp as any part of the cannabis plant containing 0.3% THC
  • Removes hemp, as defined, from the Controlled Substances Act
  • Provides that raising hemp will not impact participation in Farm Service Agency programs
  • Provides that hemp can be included in Federal Crop Insurance programs
  • Requires each state to propose a state plan or operate under Federal rules
  • Allows states to opt out of hemp production
  • Allows interstate transportation of hemp and hemp products

The passage of the new 2018 Farm Bill has really energized interest in the crop; however, full codification, rule writing, and promulgation and implementation of all elements of the new law will take time. Most Federal rules will not be complete until the 2020 crop year, and some issues like crop insurance could take longer. Some farmers have tried hemp production and have decided to wait until the rules are clear and the markets settle before planting again. Processors are still catching up with growers, leaving some farmers with a harvested crop with nowhere to go. I always advise a producer to secure the sale before planting the seed.

The hemp plant has about a third less moisture and nutrient requirements than corn and far less, if any, pesticides. It is an annual plant that grows rapidly to a height of 8 to 12 feet with large seed heads, a fibrous stalk, and tap root. About 40% of the plant material is returned to the soil, adding organic matter. Hemp is a dicot plant with a deep tap root that improves soil aeration and water permeability, particularly in compaction prone soils. The crop is harvested for seed (used as seed stock and a source of oils and food products), fiber (for cloth, paper pulp, rope, insulation, building materials), and production of CBD (cannabidiol), a non- psychoactive substance used medically to suppress seizures, reduce anxiety, pain relief, and other uses. The cannabis plant is resilient and grows well in several different soil types.

As commodity prices for traditional crops remain at 30-year lows, hemp is poised to be a viable, productive plant for continued agricultural production and has raised major interest from all sectors of the agriculture industry. Every hemp meeting for farmers that I have attended has been a standing room only crowd. Approximately 78,000 acres of hemp were grown in the US in 2018. Of that, 70% was grown for production of CBD; 10% for grain; 10% for fiber; and 10% for other uses or crop loss. Some states have opted out of hemp production so far, including Kansas, Nebraska, and Idaho. Over exuberant and uninformed law enforcement has caused several instances of hemp transporters being arrested and detained on marijuana charges. These arrests are examples of some of the rough spots that may occur during the transition to a legal cannabis economy.

I have developed a four-hour course entitled Cannabis Country that goes deeply into the topics addressed here plus an in-depth history of cannabis prohibition, the multitude of uses of the plant, phytocannabinoids, endocannabinoids, legislation, propagation, markets, and the future of cannabis in the US. Watch for it near you or contact me for information and scheduling.

This article was originally published in the Summer 2019 Terra Firma magazine.

Kirk Goble, ALCAbout the author: Kirk Goble, ALC, has been a Colorado licensed real estate broker since 1988 and founded The Bell 5 Land Company in 2000. He specializes in farm, ranch, land, and water brokerage. He is a member of the National Association of REALTORS®, The Greeley Area REALTOR® Association, and the REALTORS® Land Institute. Goble was awarded the Land REALTOR® of America by the REALTORS® Land Institute in 2013 and is a LANDU instructor for RLI.

commission split handshake

Navigating Commission Splits – How, When, and Why

If you’re successful in the land business, you work hard. You put in the time, the miles, the blood, and the sweat that it takes fighting the elements Mother Nature throws at you along the way… but we do it because we love it. And when you’ve done what it takes to build a business like ours, you don’t want to give hard-earned money away when doing commission splits. When you share your commission with an outside broker or agent, you want it to be earned and you want to achieve a mutually beneficial goal: closing. And not just any closing, one that satisfied your client’s goals.

commission splits time money intersection

The 50/50 Split
One of the most contentious topics I encounter amongst real estate agents in the land industry is commission splits. When to split, when not to, how to, etc. In my experience and in my own business, there is rarely a default split. We strive to be fair and competitive in the splits we offer, but we do typically pay relative to how involved or uninvolved the other agent was. Speaking from a listing agent perspective, while there are exceptions, in a 50/50 split scenario, we expect agents to:

  • have procured our listing(s) for their client or customer;
  • when required, show the property to those prospects; and
  • handle any and all paperwork that follows.

The Referral
If an agent calls and requests us to locate a property for their buyer and also show it for them or assist them with the showing, that acts more like a referral and that is typically how it is paid. What’s a normal referral split? As with most things in the land business, it depends… but we typically see a rate of 20-25% of the referring side. The total percentage is typically scaled based on the size of the referral, work required, etc.

money commission split

The Key to Successful Commission Splits
The key to preventing problems when doing commission splits is clear communication right from the start. Don’t operate under assumptions. If you do, you may learn later that the split structure being paid by the listing agent is different than you imagined. If you’re the listing agent, don’t be surprised if the split expected is more than you envisioned paying… especially to an agent that needed an abnormal amount of help from day one.

So, as a listing agent, before showing or negotiating tracts with selling agents, be sure to communicate clearly with them how compensation is structured. If you’re the selling agent, understand the responsibilities required of you as a selling agent to earn a strong split and determine how you will be compensated appropriately for your efforts before you invest a lot of time, effort, and miles to avoid being disappointed or frustrated later.

“Situations with poor communication can put your clients’ best interest at risk and hurt professional relationships.”

By communicating clearly, you’ll end up with relationships that prove much more fruitful over time rather than ones that leave you both angry and jaded about doing future business with each other. Handled correctly, splitting commissions with other agents can be one of the most profitable investments you’ll ever make. It can create professional friendships that have potential to produce for you both throughout your entire careers and quickly ramp up the scale of your book of business. This invaluable return is something found regularly in the roster of the REALTORS® Land Institute. Like my Dad tells me to this day, “Don’t lose dollars counting pennies.”

Clint Flowers, ALCAbout The Author: Clint Flowers, ALC, is the top producer nationwide at National Land Realty, a member of the REALTORS® Land Institute, their RLI Alabama Chapter, and the Chair of their 2019 Future Leaders Committee. He was the NLR Top Producer Nationwide in 2016, 2017, and 2018. He also won the 2017 APEX National Broker of the Year award for Timberland and was in the 2018 APEX Producers Club.

waterfront river land listing

Listen to the Land: Listing Advice

This article on land listing advice was originally published in the Summer 2016 Terra Firma Magazine.

Some years back, a long walk in a fallow field changed my career path forever. Peanut hulls, gobbler tracks, and flint flakes dotted the river-silt loam around my boots. It was March, right when Eastern North Carolina starts to warm. The soft dirt slowed me down, and I accepted it as a vehicle to better observation — of crows raising cane in the hardwoods, of deer crashing through a cypress slough, of wood duck squeals, of the muddy Roanoke River hissing along cut banks.

This property was four-hundred acres of fields and hardwoods set to be developed into twenty acre strips, river to road, like someone cutting tenderloin into steaks with their eyes shut. I was working for the developer, fresh from a long jaunt as equal parts boat captain, writer, rod and reel wholesaler, and boat salesman. I was young and ready to make some money. The rush was on for waterfront land, and this developer found a niche cutting up river and marsh-front farms in off-radar towns. But surely not this farm, I thought, bending over to pick up the base of a quartz spear point.

As luck would have it, the marketing plan didn’t work. The grand opening had few attendees. Only one of the twenty lots was reserved. Several of the migratory investors cited dissatisfaction that the only place to buy a snack was a Red Apple gas station thirty miles away. The developer, who had picked up on my outdoor affliction and who did not often put on boots, called me into his office.

“What should we do?” He asked me, having never sold fewer than all his lots in a single day. He was on seriously foreign turf.

“I could sell the whole thing to someone for a hunting place,” I said.

“Hunting? Would they pay me enough?” He asked, chewing on a giant cigar. “I need to get one point two out.”

“Yes sir,” I said, crossing both sets of fingers in my pockets.

“Well, then, you got your first listing,” he said.

carolina river

It’s a good story for me, one that hits home because it finally turned my avocation into a vocation that could put food on the table. The “listing” moment and the drive home from closing were like lightning bolts hitting pine bark – burning out all the job doubts I’d had until then. But many years later, looking back, I see new things –so many other critical lessons learned from that one sale that had very little to do with me.

I sold the farm to a sporting investor who had a mind for everything from deer, to dirt, to conservation, to equity-share sporting clubs. You could say that we “rescued” or changed the life course of that four-hundred-acre farm forever, but I believe that the farm did the work. Location, habitat, proximity to water and wildlife corridors, soil, floodplain, and agriculture – all of these things played specific roles in scratching plan A and trading off for the ultimate end user. Each element saw its higher and better use by keeping the property intact as a joint equity hunting property.

Strangely enough, the real credit goes to the developer. Instead of banging his head against the wall, he was willing to take a new approach. He listened to me and he really listened to the land and let it guide him toward a better solution. Here was a guy in a Tommy Bahama shirt, with his loafers on the desk, making a quick decision based on a very sophisticated hybrid of economics and land stewardship.

In that sense, a huge part of land listing and marketing is letting the property be what it is rather than forcing it into a box or flaunting it for something it’s not—which means that someone, most likely a land owner, may have to concede their original vision. It sounds corny, but it’s critical as a good broker to “feel” the land and how it fits with wildlife and the surrounding neighborhood.

If you have a good sense of the land and surroundings, you’re ahead of the game with the seller. I think it’s important to stick with what you believe when you meet with a listing client – whether you’re discussing price, preservation, the property’s long term potential, or lack thereof. Not sugarcoating things with the listing client or the end user always yields more solid footing, and in my experience, more closings.

A good friend of mine came to Charleston yesterday, and we rode my skiff out to a newly listed property in the Santee River called Cane Island. Mottled ducks traded across the river in the late light, and all sorts of birds moved before roost – roseate spoonbill, least bittern, glossy ibis. It was a bird and fish paradise, and we clinked bottles to that, talking about the value of Cane Island as a fish and waterfowl haven and a no-brainer conservation easement play.

river land

Riding back upriver, my friend talked about his own properties in North Carolina, one of which he was beginning to develop. “You know those old hay fields north of town,” he said, “I’m about to ruin them, I guess.”

“Nah,” I said, “That farm is naturally on the residential path.”

His other properties include big managed pine tracts south of his town, ones further from the progress stream. Outside the ducks and fish, his passion is quail, and he follows his setter around in the open longleaf on his days off. In a sense, he epitomizes the point by taking one tract to market based on location and timing, and preserving the other for its life in recreation.

Three listing and marketing suggestions stand out that all have to do with “listening” to the property and refusing to compromise:

  • List properties that match you and your skill set, passions, and beliefs rather than taking everything that comes along.
  • Market those listings according to what they are by using platforms that mirror and properly display the property.
  • Recognize when the buyer and property don’t match, and concede.

As luck would have it, my first listing both fit and shaped me. I learned from the experience, and finding a great steward for wild land became my ultimate goal – the model for the listings and buyers that I would pursue. At the time, I just used a simple hunting network via email and phone to locate the buyer.

Today, I would use a marketing venue that fit the property – whether that was the local newspaper or a sophisticated digital platform.

In any real estate niche, the goal should be the same – Find the right buyer for the property and the right property for the buyer. I believe that an honest evaluation of the land is critical to that match.

About the author: Douglas Cutting is the Vice President of Garden & Gun Land and BIC of Cutting Land & Consulting, LLC based in Charleston, SC. Cutting is an experienced outdoors-man and land broker with a diverse background in the woods and on the water.

Where are the Opportunities in Opportunity Zones?

What is an Opportunity Zone?

By now, most of you have probably heard about opportunity zones. For those that have not, the program was created by the Tax Cuts and Jobs Act on December 22, 2017, to incentivize investment in economically distressed parts of the country through tax benefits. The mechanism provides reductions in capital gains tax liability for investors who make long-term investments into census tracts designated as opportunity zones. Opportunity zones will likely favor shovel-ready development projects, as well as capital intensive renovations of assets under certain conditions.

How it Works

There are several primary considerations for opportunity zone investment regarding timing, product type, and implementation. Below is a summary of what we believe will have the most impact on our clients:

  1. Capital gains realized after December 22, 2017 must

be invested into one or more Qualified Opportunity Funds (QOF) within 180 days of realizing gain through sale of appreciated assets.

  1. QOFs are required to have a minimum of 90% of their funds invested into designated opportunity zones. QOFs can invest directly into qualifying real estate and/or make equity investments into qualifying
  2. A QOF investment may be sold and the tax benefits protected so long as the funds are reinvested into a new QOF investment within 180 This is only for purposes of deferring initial capital gains. The holding period for purposes of deferred tax liability reduction and step-up in basis of opportunity zone investments restarts upon reinvestment.
  3. Unlike a 1031 Exchange, this program applies to gains from any investment and is not limited to gains from real estate investments. Additionally, this program only requires reinvestment of the gain from the original investment, which leaves the investor free to use the basis as they
  4. Property investment needs to meet one of two criteria: (1) real estate needs to be put to “original use” with the QOF, or (2) the fund needs to “substantially improve” the “Original use” means that the building was put into service for the first time at commencement of the QOF investment. Certificate of occupancy is assumed to be a reasonable measure for this determination. “Substantially improve” means that the QOF needs to more than double its basis in the property within 30 months of acquisition. These requirements only apply to the improvements and not to the land on which they are sited. Recently proposed regulation indicates that a QOF may be treated as the “original user” of a property that has been unused or vacant for at least five years.
  5. Land generally qualifies as opportunity zone business property when used in an active trade or business, excluding situations that are viewed as abusive (e.g. land banking strategies). This applies to both improved and unimproved
  6. Leased property may qualify as business property without substantially improving the property or the tenant being the original The tenant may also be a related party subject to additional restrictions.
  7. Certain debt-financed distributions to investors may be tax free and working capital held by a QOF may, in some cases, be allowed to extend beyond 30 months when the fund is awaiting approval of
  8. A partnership or corporation may self-identify as a QOF by filing Form 8996 with their tax
  9. The gain on the original investment shall be assessed no later than December 31, 2026, regardless of whether or not the QOF investment has been sold.

The Benefits

  • If the QOF investment is sold during the first 0 to 5 years – The original gain and any incremental gain on the QOF investment become taxable at that time.
  • If the QOF investment is sold during years 5 to 7 – The original gain is reduced by 10%. Not available for first QOF investments made after December 31, 2021.
  • If the QOF investment is sold during years 7 to 10 – The original gain is reduced by an additional 5% (15% in total). Not available for first QOF investments made after December 31, 2019.
  • If the QOF investment is sold after Year 10 – No gains are incurred on the QOF investment.

Bottom Line

According to David Bitner, Americas Head of Capital Markets Research for Cushman & Wakefield, analysis indicates that this program could add as much as 150-300 basis points to a project’s after- tax Internal Rate of Return.

Agriculture opportunity zone

Opportunity Zones and Agriculture

Many of our clients are interested to learn if this program applies to agricultural land. The most recent IRS guidance seemed to indicate it may be possible, while also providing an example of when an agricultural investment would NOT qualify. The proposed regulation states that, “a QOF’s acquisition of a parcel of land currently utilized entirely by a business for the production of an agricultural crop, whether active or fallow at that time, potentially could be treated as qualified opportunity zone business property without the QOF investing any new capital investment in, or increasing any economic activity or output of, that parcel [emphasis added]. In such instances, the Treasury Department and the IRS have determined that the purposes of section 1400Z-2 would not be realized, and therefore the tax incentives otherwise provided under section 1400Z-2 should not be available.”

We are optimistic that if the property is substantially improved, as described earlier, it may be possible to justify an investment in farmland as a qualified investment. For example, if the land purchased is unimproved, the basis would be zero dollars, and any substantial investment into the property that increases its economic activity or output (such as converting it from row crops to permanent plantings) would seem to qualify. This could have significant impact on regions with farmland suitable for development to permanent crops, such as fruit or tree nut orchards, or vineyards. Given the potential for the tax implications associated with this strategy, it is recommended that you consult with your tax attorney prior to making a QOF investment into farmland.

Finding Value Beyond a Qualified Opportunity Fund

According to data recently released by Zillow, homes sold within an opportunity zone saw an average increase in value of over 20% year over year, while values for homes not within an opportunity zone saw comparably modest increases. It is possible that this trend is a result of those properties selling at a premium to a QOF for redevelopment or renovation. However, it is more likely that buyers believe these economically distressed communities will see outsized capital investment due to this program and, therefore, will see positive change and generate greater value appreciation over time.

So what does this mean? Even if no qualifying projects are realized as part of this program, a community could see a substantial benefit through an increase in investment dollars from non-QOF investors hoping to take advantage of the community benefits the program may generate. This speculation and influx of capital is likely to be somewhat self- fulfilling, creating exactly the kind of investment and benefits the program was designed to foster. In some areas, these benefits aren’t likely to stop at the census tract boundary and it is easy to see how they could spill over into neighboring communities despite them not being within an opportunity zone.

Key Takeaways

 

  • Time is of the essence – The structure of the program is such that the earlier funds are invested and the longer they are held in a QOF, the greater the benefit. The table below summarizes how these benefits are impacted by time.

Opportunity Zones Chart

  • Engage professionals early on – Talk to your tax attorney to ensure you don’t inadvertently make a mistake that will disqualify you from taking advantage of these benefits in full.
  • Not all opportunity zones  are created equal – Like all investments, some will perform better than others. Engage a knowledgeable real estate team to ensure you fully understand the fundamentals of the specific market. Look for markets with strong employment, income, and population growth, as well as those already seeing signs of economic
  • No substitute for quality underwriting – The program will likely make a good investment better but is unlikely to salvage a poor
  • Time will tell – We won’t know if the program will yield the desired results for many years. If Zillow’s data is an early indicator, the program could be a value driver that generates above average returns for savvy investors and positive externalities for the communities.
  • Ongoing questions – The second round of proposed regulations has removed much of the uncertainty from the program and we should start to see increased transaction activity as a result. The most recent round of guidance is generally viewed as being favorable to the taxpayer, which should increase confidence that the ultimate implementation of this program will not be unnecessarily punitive. However, as is the case any regulation of this scale and impact, there are likely to be changes and growing pains as the final details are worked out and ultimately approved.

This article was originally published in the Summer 2019 Terra Firma magazine.

Matt DavisAbout the author: Matt Davis is a real estate broker with Cushman & Wakefield. He is based in San Diego, CA, and assists clients with the disposition and acquisition of investment grade agricultural and transitional land assets. He is also founding member of the company’s Land Advisory Group and Agribusiness Solutions Team. Matt is a member of RLI and serves the 2019 Future Leaders Committee.

Four Tips for a Successful First Year as a Land Agent

Becoming a land broker sounds fun. You see all the cool pictures, videos, and listings that agents post online and on social media, so you think “Hey, I like the outdoors, I like to hunt and fish, I know my way around the woods, so I’m going to become a land agent and just watch the money roll in.” As many a land broker will tell you, you are dead wrong. Selling land is a lot like farming. It takes time, money, strategic planning, and at the end of the day, a lot of your success still depends on the weather. Here are some tips for getting over the learning curve as a new agent:

  1. Hope for the best, plan for the worst – Don’t just run out and buy a fancy 4×4 truck, UTV, winches, and tires. Being able to navigate rural lands is important, but don’t spend money you don’t have yet to do it. Be modest, create a budget. Work with your broker to outline how much you should allot to your personal digital marketing, print marketing, networking opportunities, etc. and understand when you can expect those efforts to start taking hold. Don’t spend money you don’t have just to break even later. Economies change much like the weather, and as long as you’re not over extending and you are able to adjust, selling land in a bad economy can be equally or more profitable than selling land in a good economy. Learn how to pivot your business around whatever industry weather changes may come
  2. Educate yourself at every opportunity. If you want to be an expert, don’t just play one online. Invest in yourself and become one. Join professional organizations like RLI and align yourself with industry leaders, working toward meaningful designations like that of the Accredited Land Consultant. Learn from those around you in the industry, from their mistakes as well as their successes. Follow and understand pressing industry issues: income taxes, tax shelter opportunities, current or upcoming regulations, laws, or policies that effect your client base, etc. You will be most successful in this business when you know how to best make or save your clients money.
  3. Network & get referrals. Everybody uses postcards, letters, online gimmicks, etc. to promote. Nothing wrong with that; it’s a necessity we all face, but networking is one of the most fruitful investments of time you can make in our industry. The larger the network of people that understand who you are, what you do, and why you are an expert in your field, the more business will walk in your door without you having to spend your valuable budget dollars trying to procure new clients. Start with your friends and family. They are the bedrock of a strong network and the people that will be your biggest promoters. Add your past clients to that essential list once you start to have them. A major key to successful professional networking is reciprocating. Be generous and genuine in your referrals of other professionals first, without expecting or asking for anything in return, and it will pay great dividends throughout your career. Being an RLI member aligns you with a vast network of land professionals from across the country, so make sure to take advantage of it.
  4. Above all, align yourself with a strong brand. By now, we’ve all heard about branding and how important it is. In this context, it’s not only about having a recognizable logo. It’s about what’s behind the logo: like the leadership and support team. Before you join a company, understand its culture and make sure it aligns with your personality and your goals. Join a company that invests in you, promotes your growth, provides educational opportunities, mentorships, etc., one that is constantly innovating and evolving rather than one that’s just waiting on the next disruptor to emerge and knock them backwards.

At the end of the day, you are not successful in this business because you like land, have a real estate license, and want to be successful. It comes down to what you put into it and being too stubborn to quit when it gets tough. There’s a reason a lot of people in this business wear weather hewn boots and hats – They’ve earned them!

This post is part of the 2019 Future Leaders Committee content generation initiative. The initiative is directed at further establishing RLI as “The Voice of Land” in the land real estate industry for land professionals and landowners. For more posts like this, click here


About The Author: Clint FlowersALC is a top producer with National Land Realty, a member of the REALTORS Land Institute of Alabama, and a member of the 2018 Future Leaders Committee.  He was a NLR Top Producer Nationwide in 2016 and 2017. He also won the 2017 APEX National Broker of the Year award for Timberland.

Everything You Need to Know About Bringing in Outside Parties to a Land Transaction

The sale of property that predominantly consists of land requires an extension to the set of tools you would normally use in a residential listing. Listing land has unique requirements that necessitate additions to the team of professionals involved in a transaction, even prior to marketing the property. In certain circumstances, adding another agent or even another brokerage firm may increase both marketing power and product expertise. Opening title with a title company or attorney’s office aids the Escrow Officer in getting ahead of any title issues. Bringing environmental and biological consultants on board can provide crucial advice when working on developable acreage with sensitive habitats. Once the property is listed and ready to market, a land planner, economic development agency, and surveyor could inform potential buyers about what is for sale, or what could be produced on the property. Each phase of the process during a successful sale has important and legal ramifications if not completely correctly. Below are details on who the professionals are that we most utilize, when we recommend speaking with them and why.

Who: Surveyor/Engineer

When: At listing

Why: If the property you are selling hasn’t been surveyed, it is advisable to recommend the seller have a survey completed with the corners of the premise marked (for larger properties we like to have them stake the corners with 10′ white PVC pipe). This allows you to convey accurate measurements to perspective purchasers, while having the corners visibly marked so that buyers may visualize the boundary when touring the site.  Additionally, a survey will also bring to light any issues involving encroachments, potentially avoiding costly retrades or cancelled escrows when given the foresight to deal with these problems early in the process.

When marketing transitional land, primarily for residential development, a civil engineer who is familiar with the local zoning code can be engaged to provide a lotting study. Having this study, which shows a hypothetical layout for a residential subdivision in accordance with the minimum development requirements of the zoning code and site constraints, can help support value. Similarly, hypothetical site plans can be developed for nonresidential development sites that show potential layouts and building footprints. An engineer may also be able to provide guidance or connect you with the correct contacts at the municipality to gain an understanding on the ability to access public utilities (water, wastewater, stormwater, natural gas, etc.), along with their distance from the property and whether they have enough capacity to support the proposed use.

Who: Land Use Planner / Architect

When: At listing

Why: Engaging a land planner to provide hypothetical master plan layouts that incorporate a mix of future uses for larger development sites can help prospects understand the breadth of the opportunity, assigning value to the portions of the site allocated to different product types. Additionally, if they are familiar with the local municipality, a knowledgeable land planner should be able to provide a plan that will be well received by both the market and local decision-making bodies.

Similarly, (but more typically for infill development projects) having an architect provide a feasibility study highlighting the applicable development regulations for the site (including maximum square footage or density constraints) and a massing report that shows the maximum building envelope along with architectural renderings of what a potential building may look like. These resources can help purchasers quickly assess the scope of the development opportunity at hand.

Who: Land Use Attorney 

When: Prior to engaging the market

Why: To most local elected officials, nothing is more important than land use. For this reason, when working on a transitional land project it is important for the seller to have advice from counsel that understands local politics and the land use regulatory process. This will help assess the reasonableness and likelihood of success for any offers received that are contingent on development. They can also provide valuable insight during the entitlement process and increase a project’s chances of approval.

Who: Real Estate (Transaction) Attorney

When: Prior to receiving offers

Why: Throughout the sale process, the seller should seek the advice of real estate counsel to ensure they are appropriately mitigating risk. This includes reviewing their current situation prior to receiving offers so that the agent can make Buyers aware of any business terms that are unique to this seller’s specific situation throughout the process of developing an offer. Additionally, working with counsel to review all agreements and due diligence material prior to delivery can mitigate the potential for the seller to expose themselves up to unnecessary liability.

Who: Title Officer/Attorney

When: Prior to or at listing

Why: A title review should be completed as early in the process as possible to ensure marketable title. Confirming how title is vested and addressing any encumbrances (i.e. outstanding liens or deeds of trust, lis pendens, easements, etc.) early in the process can ensure you are dealing with a property’s true decision maker, along with providing time to address any concerns long before you have a buyer at the table.

Who: Water Rights Attorney

When: At listing

Why: For any asset where access to water is currently or potentially a critical component of value, having a water rights attorney provide an opinion on the validity and defensibility of any water rights may be necessary to support any assessment.

Who: Well Driller 

When: At listing

Why: In regions that are dependent on groundwater, it is advisable to discuss the site with a local well driller to determine the feasibility of developing a well at the property, the condition of existing wells (if applicable), and any known issues with the groundwater resources in the area.

Who: Environmental Consultant 

When: Prior to or at listing

Why: Unresolved soil and groundwater contamination can be devastating to the value of a property regardless of the source. Having a consultant provide a desktop report prior to listing the property can help educate you and the seller about any known issues in the area. If there are reasons for concern, an environmental consultant can help develop a strategy to address the concerns and provide certainty to a buyer. If the owner has a previously completed Phase I Environmental Site Assessment (ESA), a report that looks at the current and historic uses of the property to assess if they may have impacted the soil or groundwater beneath the property and could pose a threat to the environment and/or human health) a consultant can review the report and help summarize what was found previously, as well as what additional investigation (if any) may be warranted.

Who: Biological Consultant

When: At listing

Why: The existence of sensitive plant and animal species, or habitats could substantially impact the cost to develop as well as the actual developable acreage of a site. Asking an expert if there are any known species in the area along with any reasons for concern by having an informal site visit completed to look for any indications of sensitive species or habitats will provide increased certainty when engaging the market.

Who: Consulting Forester 

When: At listing

Why: As detailed in the Should I Invest in Timberland Real Estate? post by Clint Flowers, ALC, a fellow RLI member, developing a solid timber management strategy is critical to the successful investment in timberland.  Additionally, if a consulting forester is engaged earlier and familiar with the property, they can help prospective purchasers assess the opportunity and determine if it is the right fit for their investment criteria.

Who: Escrow Officer

When: At listing

Why: Having a trustworthy and capable Escrow Officer as part of your team will help keep a transaction on track. An Escrow Officer can often work with Title in advance of a transaction to address any issues that may need settling prior to getting the property into Escrow. This type of preparation can limit last minute issues and help ensure a smooth transaction from start to finish.

Who: Economic Development Agency (public and/or private) 

When: At listing

Why: For development opportunities and transitional land, economic developers should be made aware of the offering as early as possible. Not only are they a potential source of a buyer, but they can typically provide guidance on incentives, approval processing, and general market expertise. Leveraging their involvement can save time and increase the likelihood of a project getting approved.

Who: Other Brokers/Agents 

When: Prior to listing

Why: Fielding the best team on every deal is fundamental to our success in business. When given the opportunity to work on a project outside of our unique area of geographic or product expertise, a referral is not always possible depending on our relationship with the client. However, partnering with the right team of real estate professionals to provide the expertise you lack will improve your learning curve, expedite the sale process, and (most importantly) ensure you achieve the best possible results for your client. RLI has a vast network of agents across the country with extensive expertise in the various sectors.

Who: Appraiser 

When: Prior to listing

Why: When analyzing a new opportunity, speaking with an appraiser knowledgeable in the market can help establish the most defensible approach to valuing a specific asset along with developing a defensible baseline value. They may also be able to provide verified comparable sales to support your analysis.

As you can see, much of this work is recommended to be completed early in the process. Understanding these aspects of a property and addressing any areas of concern sooner than later can:

  • assist with establishing a defensible asking price of the property;
  • ensure you present a comprehensive offering to the market;
  • help you address buyers questions early and knowledgably, and most importantly;
  • and decrease the level of uncertainty around a property and reduce the likelihood of surprises during escrow that may lead to avoidable delays, price reduction requests, or failed escrows.

While this list has been assembled primarily from the perspective of a listing agent, a buyer’s agent could also benefit from using this as a guide to assist either their clients with due diligence or their own preliminary investigations to determine if a site fits their client’s acquisition criteria. The list is not meant to be comprehensive but, in our experience, it addresses the vendors, consultants, and professionals we engage with most frequently. Establishing a stable base of knowledgeable experts can expand your capabilities and allow you to more effectively guide a client through the process of buying or selling real estate.

This post is part of the 2019 Future Leaders Committee content generation initiative. The initiative is directed at further establishing RLI as “The Voice of Land” in the land real estate industry for land professionals and landowners. For more posts like this, click here
About the Author:
 Matt Davis is a real estate broker with Cushman & Wakefield. He is based in San Diego, CA, and assists clients with the disposition and acquisition of investment grade agricultural and transitional land assets. He is also founding member of the company’s Land Advisory Group and Agribusiness Solutions Team. Matt is a member of RLI and serves on their 2019 Future Leaders Committee.

About the Author: Cynthia Bynum started in Real Estate in 2003 as an investor and acquired her license in the State of Texas in 2009. She was raised on Eagle Mountain Lake and is quite familiar with properties in Parker and Tarrant Counties. Joining Trinity Territory Brokerage firm was the best move for her career. Her specialties range from representing buyers and listing residential properties to commercial, land sales, property management, foreclosures,  and leasing.

How To Maximize Your Listing: Hunting Properties

The Highest and Best Use. All in this industry know the value of this term, but are we consistently applying it in an effort to truly maximize the features of your latest listing? In researching ranch and land property listings across the United States, it is evident that there may be value being left on the table. Sometimes this value can be significant, but agents may gloss over it as just another feature. I’m talking about hunting properties. I’ve come across numerous listings with some of the best access to hunting and/or might even qualify for landowner tags that in some areas are worth thousands of dollars; and the listing has nothing more than a bullet point that says Hunting. In order to maximize the value of highest and best use, let’s look at how we can better represent and convert hunting into positive dollar value.

The Outdoor Industry’s Effect on Land Value

The wildlife recreation industry is a $110+ billion industry and, of that, over $25 billion comes from hunting alone. In the West, agricultural land is rapidly being converted for recreational uses. According to the CCIM Institute, “demand for both improved and unimproved recreational property has contributed to rising rural land prices. An increased interest in outdoor recreational hobbies as diverse as hunting and bird-watching, a graying baby-boom generation that is more conscious of the investment potential in vacation and retirement properties, and low interest rates have come together in the past five years to create a niche market for recreational land.”

How Access to Hunting Affects Property Values

As the outdoor industry continues to grow and access to public lands continues to shrink, land with hunting access has become highly desirable. Hunting properties provide a buyer with the perfect mix of recreation and investment. Passive cash-flow opportunities include the leasing hunting rights, in addition to grazing and leasing land for farming. According to CCIM, in many cases, a hunting lease can bring in more than five times the revenue from cattle grazing. Simply stating hunting on your listing doesn’t sound like nearly enough to communicate the value that the land truly holds in its highest and best use case.

How To Better Market Your Hunting Property

As a broker, how can you leverage the indiscernible value of a property with hunting amenities? A good place to start is to create a section in your listing dedicated to the hunting amenities. You may be leaving money on the table and doing your client a disservice to just list “hunting” as a bullet point. If you are not a hunter or don’t know much about the area, this can be easier said than done. So how can you find out more information quickly and inexpensively? Start with your local Parks and Wildlife office, as the rangers can help orient and qualify your search metrics. Also, consider jumping online and research the area around your client’s property, to see what kind of access public land access is available.

Consider becoming knowledgeable in your states hunting laws to determine if that property qualifies for landowner tags. For example, in Illinois, 40 acres is the minimum required to obtain a Deer tag for shotgun season, whereas western states may require a contiguous quarter-section worth of acreage, or more, to qualify. There is significant value in this knowledge, and it is well worth the time spent researching the finer details. To recap: here is a list of some key items to research and market on your hunting land listing:

  • Hunting Access: What is the nearest public land access or is the property large enough to hunt on
  • Wildlife Population: What is the wildlife population in that area? Big game, small game, waterfowl, and/or upland bird hunting
  • Revenue Opportunities: Does this property qualify for landowner tags and how many? Are you able to turn the land into a hunting lease?

These are three key elements that can offer more value to a hunting property, and a good starting place for any agent. However, if you find a trusted local contact who is a hunter and that has the right tools and knowledge of the area, you can consider putting together a spectacular Hunting Guide that is sure to impress any prospective buyer. There are also a myriad of companies throughout the US with dedicated teams of hunters and outdoorsman, who can help in putting together a complete hunting and outdoor recreation analysis to be used to bring considerable value to the unseen benefits of a property. Consider reaching out to your local RLI chapter or use the Find A Land Consultant search tool provided by RLI for help in finding a consultant who can provide maps with public land access, hunting units, species migration patterns, hunting tag draw odds, landowner tag information, and more.

As land is being converted to recreation and access to public lands is shrinking, there is more value than ever before in hunting properties. The right buyer for a hunting property will know its inherent value, but don’t miss the target in marketing it appropriately, for achieving that highest and best use should be a guiding, as well as an inherent, principal.

Reference Citations

“Hunting for Recreational Properties”, CCIM Institute,

https://www.ccim.com/cire-magazine/articles/hunting-recreational-properties/?gmSsoPc=1

 

About the Author: Mike Miller, MBA, is the Vice President and Co-founder of White River Ranch Marketing LLC. With a background in Automotive and Sports and Entertainment Marketing, Mike is lending his decade-plus of experience in marketing and branding to the farm and ranch land real estate industry via his startup, WRRM – designed to expand the virtual impact of land brokers and their listings throughout the US.

The Best Advice Top Agents Ever Got

A few words can change your life. The advice you get from your mentor, friend, or family member can even change the course of your career forever. Accredited Land Consultants Geoff Hurdl, ALC,, Bill Burruss, ALC, and Terri Jensen, ALC, share the advice that helped shape their successful careers in land.

Know Yourself to Know Others

Understanding yourself is an important part to succeeding in the land industry. You need to know your own strengths and weaknesses in order to improve your weaknesses and play up your strengths.

“Doing the best that I can and to ‘know myself’ have been the underlying themes to my leadership skills,” says Bill Burruss, ALC, winner of RLI’s 2018 Land REALTOR® of America Award.

“These two pieces of advice were instilled by my parents and reiterated by my teachers in high school. Respect for others was also a strong value. It could be argued that I was taught to live The Great Commandment, to ‘love thy neighbor as thyself’. I believe to be successful you have to know yourself. Both my parents and teachers would challenge me by having me evaluate myself regularly. This forced me to understand what I did well, and where I had problems, and ultimately make the needed changes to achieve my goals.”

Don’t Spread Yourself Too Thin

There are lots of ways to make money in real estate. Instead of trying to excel in every single field, Geoff Hurdle, ALC,  winner of the 2018 APEX Wrangler Award, found success by focusing his time and energy on the things he knew the most about.

“My father taught me there were many ways to make money in real estate,” says Hurdle. “One of the most valuable things he taught me was to stick with what you know.  I learned the value of that advice when I strayed from it. It cost me, a lot. I went back to what I knew and I have not looked back again!”

Respect and Hard Work Are Everything

Land real estate is a people business at its core. Respect for your fellow man can help you go far. Burruss also learned that the land industry is one where hard work and a love of land speak louder than race or gender.

“Respect was all about my generation, growing up in the ‘60s. I went through integration in the 7th grade. Within four years, women were hitting the streets in waves wanting equal pay and better job opportunities. Before I became a REALTOR®, I was hired by a person who was gay and then one who was African American. When I started real estate, my broker was female. The reason I got into leadership on the national level was by invitation from the Virginia Association of REALTORS® President-Elect, Nathan Booth, who was the first black president of a REALTOR® state association. All of these people had a great love for their fellow neighbor that I want to replicate. All of them are great because they are great, not because they are female, African American, or gay.”

Terri Jensen, ALC, with National Land Realty also highlights the importance of the three R’s. “Respect for self; respect for others; responsibility for all that I do,” says Jensen.

Hard work is also essential for success in the land industry, as Dan Murphy, ALC, with M4 Ranch Group explained in his 2018 Terra Firma article Getting To The Top: Finding The Apex Of Success.

“Each of us in the industry knows that we only eat what we kill. This industry makes no payment for a second place finish,” says Murphy. “If the transaction does not close, we don’t get paid. Our success at M4 Ranch Group in 2017 is without fail directly tied to the strength, intelligence, and the never-quit attitude of Team.”

Communication Is Key

Making sure that you are not just heard, but understood ensures that you and your client are on the same page.

“If you don’t know the answer to a question, let the client know that,” says Terri Jensen, ALC,. “Do let them know, though, that because of your years of experience, education, and expertise, that you probably know someone who can answer the question.”

The land industry is so massive and there are so many roads to take that it can be easy to feel lost. Listening to advice from land agents with decades of experience can help guide you in the right direction.

Looking to find a mentor in the land industry that can give you the advice that will change your career forever? Becoming a member of the REALTORS ® Land Institute gives you access to a national network of over 1,300 land professionals to connect with and learn from.

About the Author: Laura Barker is a freelance writer based out of California for the REALTORS® Land Institute. She has been with RLI since October 2017.

 

 

Five Tips for New Land Professionals

The timber business has always been in my family. Growing up, my dad owned his own timber brokerage company. It was something I was really familiar with. Being on land, buying, selling and trading it, were all things that I was accustomed to. But it was a career path my dad said I should never take.

I always wanted to do what my dad did, so when he sold his business I wasn’t sure where to go with my career. I ended up going to the University of Alabama and graduating with an environmental degree. And soon after, got a job in Mobile, working for an environmental company where I did safety and environmental consulting. I continued that line of work for about four years before I decided to go part-time with them and obtain my real estate license.

I had been looking for a different career opportunity for a while. Somewhere where I could grow and be my own boss. So, in April of 2016, I went to work for National Land Realty (NLR). The opportunity came up through a mutual friend who happened to be a broker for NLR. And I went full speed ahead with only the knowledge and experience in land I had gained while growing up. But it was a challenge I was driven to overcome.

Starting out at NLR as a Land Professional, the first listing I got was in Choctaw County, Alabama. I never really knew how many people were interested in buying land until I got that listing. I ended up generating over five sales on five different properties from that first listing. Closing on that first deal made me more motivated than ever before.

My biggest challenge thus far has been gaining trust within my clients. But trust comes from hard work and doing exactly what I say I’m going to do. Like making sure I talk to the previous landowners, spending more time on each deal… It’s about going above and beyond. And not being afraid to get out there and get muddy.

As a younger and newer Land Professional, I want to offer advice to others out there who are just starting out and want to reach that next level. Here are my top 5 tips on how to get there:

  1. Be persistent.

If I could only offer one piece of advice, it would be to always be persistent. You have to go out and get the business. You can’t just sit around and wait for it to come to you. You’ve got to go dig it up each and every day. Don’t be afraid to ask questions, ask other professionals for help and don’t take no for an answer.

  1. Network, network, network!

Networking is key in the land real estate business. It’s about keeping your name in front of people – creating your personal brand. So, make sure to attend all the outdoor events you can. Get on different outdoor committees and even go to city council meetings. Don’t be afraid to stop at your local bank, coffee shop or co-op store to market yourself and your business. You want to create a culture of, “That guy knows what he’s doing.”

  1. Find a mentor.

Finding someone who’s been in the industry for a while and can show you the ropes can benefit you greatly when you need that extra bit of knowledge on a certain topic or just a boost of motivation. A mentor can also help you see areas where you may need some improvement.

  1. Go above and beyond.

To be successful and get to the next level, you’re going to have to put in the time and the effort. Working longer hours, making those extra phone calls, going to those late-night meetings – all these will pay off in the end.

  1. Be honest and thorough with clients.

Always keep your word with a client. Spend that extra time with them going through each step of the process so they feel confident. You’ll be able to gain their trust and build a relationship with them that could last for decades to come!

Forrest During is an RLI member and land professional at National Land Realty who specializes in acquisitions, sales, recreational, timberland, and conservation properties. This post was originally published on the National Land Realty blog in August 2017.

The Value of Finding a Mentor in the Land Industry

This article was originally posted to the National Land Realty blog

Getting started in the land industry can be daunting. From knowing about the latest land laws to networking to juggling a work/life balance, it’s easy to be overwhelmed. Having a mentor in the land industry can help you succeed as a land agent in more ways than one.

Wisdom You Can’t Learn In A Classroom

Although land education is extremely important, to the point of being necessary for agents that want to maximize their earning potential, there are some things you can only learn from experience — such as how to deal with difficult clients or learning how to balance your time as a land agent. These are things you can learn from mentors. A mentor can also guide you away from mistakes they’ve made in the past and learned from, saving you from making those same mistakes as a newer agent.

The benefits of mentorship can go beyond knowledge in the land industry.  A mentor can also guide you towards success beyond a dollar sign.

“‘Successful’ to me was an individual who worked with integrity, spent time away from work with friends and family, was healthy, financially very well off, and had a process and system to their business,” wrote land expert Jacob Hart in a guest post for RLI. “I have learned you can make more money than you can count. However, if you do not have a passion or dreams to go after with that money, more is actually less.”

A mentor can do more than just help you succeed in the land industry. They can help you define and thrive for success in life as well.

Networking

The land industry is a people-driven business, so networking is essential for a successful career. However, meeting new people can be hard, especially if you live in a remote location or are networking when new to the industryFinding a mentor in the land industry opens the door to meeting their partners, colleagues, and clients, which could grow your own client base. Your mentor will know what events are best to meet clients and other land experts. They can also connect you to people on social media or add you to their social media groups.

Your Field of Expertise

Mentors are especially important if you specialize in a unique type of land or service.
If your specialty is in land auctionsvineyardstimberland investment, or mineral rights, not just anyone can be a mentor.

vineyard

There are so many benefits of having a mentor that we couldn’t list them all in one article. We hope this article has inspired you to seek out a mentor to help carve out a path for a successful career in the land industry.

Interested in finding a mentor near you? You can use RLI’s Find a Land Consultant tool or get in contact with one of our RLI Chapters to get started finding land experts who have expertise in the same field you’d like to be involved in or who are in your area. We may be biased but we also recommend becoming a member of the REALTORS® Land Institute. The biggest membership benefit we hear about from our members is the networking and camaraderie that their RLI membership continues to bring them year after year which basically makes the membership pay for itself because of the referral and knowledge sharing opportunities.

About the Author: Laura Barker is a freelance writer based out of California for the REALTORS® Land Institute. She has been with RLI since October 2017.