land survey

Everything You Need to Know About Getting A Land Survey

Before purchasing or selling land, you should have a professional survey the area. A land survey tells you a lot about the property. Without a land survey, you can’t make informed decisions that will help you understand what the property offers and its full value.

The Top Benefits Of A Land Survey

Crucial information that you will learn from a professional land surveyor about a property includes:

  • A property’s precise boundaries.
  • The specific locations of structures, additions, and improvements.
  • Any slopes or other geographic features that could affect the land’s use.
  • The location of easements and utilities.
  • Whether any of the land is in a floodplain.

How Land Surveyors Do Their Jobs

Surveying land means taking extremely accurate measurements over long distances. Today’s surveyors use technology to improve accuracy and save time. Surveyors often choose their tools according to the project’s needs. Popular tools include:

  • Theodolites, optical instruments used to measure angles.
  • Altimeters that measure slopes.
  • Total stations, electronic distance measurement devices that also help when leveling surfaces.
  • Global Positioning Systems (GPS) that can use satellites to take extremely accurate measurements.
  • 3D scanners that can capture changes in elevation.

Modern land surveyors also use software developed to combine information from several devices. The software makes it possible to create detailed land survey reports that are easier for ordinary people to read.

land survey

Why You Need The Benefits Of A Land Survey

Some of the benefits of having information from land surveys are pretty obvious. For example, you need to know the precise property lines before you can determine a plot of land’s acreage and value. Some of the benefits, though, aren’t so obvious to people looking to buy or sell land.

Deciding Whether Land Fits Your Intended Use

A property’s features determine what you can do with the land. If you want to start a vineyard, then you may need sloped land that drains well.

Even the direction of the slope can matter. People who want to start orchards, for instance, need to pay close attention to whether sloped land faces north or south. When growing apples during autumn, you want trees to grow on a northern-facing slope if possible. During the spring, your trees will get better light on a southern-facing slope.

Knowing Where You Can Build Structures on Land

Building structures like houses, barns, and sheds can improve the land’s usefulness and value significantly. You can’t, however, just start building a large structure without knowing things like the land’s slope and the location of underground pipes and utility lines. The moment you break ground, water could come gushing from the hole making a costly mess. Suddenly, you have to delay your plans and spend money repairing the broken pipe.

A land survey provides the information that you need to choose the right locations for your structures. What you learn about your land could help you save money and finish your construction project faster.

How To Find A Credible Land Surveyor

You can’t accept anything less than perfection from your land surveys. A survey that doesn’t correctly identify the location of underground electrical wires could have serious consequences when you start adding structures to your property. Inaccurate measurements could also lead to lawsuits with neighbors who want to protect their property lines and leave you short-changed on your acreage.

Don’t take any chances when hiring a local land surveyor. Instead, talk to a qualified land expert who can recommend credible land surveyors in your area.

Qualified land consultants work with qualified land surveyors frequently to ensure the land transactions the handle go smoothly. They know who you can and cannot trust to do a good job. Also, they know enough about land surveying that they can spot the difference between decent and excellent surveyors as well as work with a surveyor to make sure all of your needs are best met.

Find a land consultant in your area to help you hire a professional land surveyor who knows how to provide the detailed, accurate services you deserve for your money.

rural home

Will Americans Trade-In Their Urban Lifestyles For Rural Ones In The Wake Of COVID-19?

The COVID-19 pandemic will encourage a lot of people to rethink their urban lifestyles. In a time when social distancing and self-isolating play crucial roles in health, consumers living in urban centers find it nearly impossible to follow the rules for safety and are realizing they are at a much greater risk of being impacted by such an outbreak. The COVID-19 pandemic will, however, only add to subgroup of the population moving away from large, crowded cities to homes with more open lands in rural areas.

In fact, in a recent Virtual Round Table discussion about COVID-19’s Impacts on The Land Market, Accredited Land Consultant Lisa Johnson with Horsepower Real Estate out of Junction City, OR, predicts that there will be a lot of demand and says that right now there isn’t a lot of inventory to meet it. “We’re still seeing a lot of people calling from the larger metro areas… that, whether its 5 acres or 100 acres, they just want somewhere to go.” Read more insights from Lisa in the COVID-19 Impacts on Rural Residential Hobby Farms RLI blog post.

New York City at the Epicenter of a Pandemic

It didn’t take long for New York City to become the COVID-19 pandemic’s epicenter. Millions of people commuting on a public transit system and passing each other on crowded streets helped the virus spread quickly.

Millennials Were Already Moving to Suburbs

Fear of future pandemics will likely encourage more people to leave cities and settle in suburban and rural areas. Those moving away from cities, however, are not starting something new. They’re continuing a trend.

Drew Ary, ALC, with Ary Land Co in Coweta, OK, said in the COVID-19’s Impacts on The Land Market Virtual Round Table that he is seeing a similar trend in land sales with “an increase in anything outside of 45 minutes of a major metropolitan area.” He also noted that the inventory and interest rates are low and thinks “we’ll continue to see an incredible increase in demand for these types of properties. Read more insights from Drew in the COVID-19 Impacts on Rural Residential Hobby Farms RLI blog post.

As Millennials get older and start families, many of them realize that they cannot continue to afford living in large cities. The median home cost in New York City exceeds $680,000. In LA, the median home cost is nearly $690,000. Few families can afford to spend that much money on housing. A growing number of Millennials and other young people see suburbs, mid-sized cities, and rural areas as cost-saving alternatives with other perks of their own.

Knowing that they will have to spend half a million dollars more on housing to live in big cities, a lot of people don’t mind moving. Moving to smaller cities, suburbs, and rural communities often means that they can purchase larger homes, access better public education, and avoid higher rates of crime – not to mention improve their mental health. Add the fear of another pandemic, and it becomes easy for people to reconsider living in places like New York, Chicago, Washington, D.C., and Los Angeles.

rural home

Technology and Remote Work Opportunities May Influence Decisions

Improved technology and a growing number of remote work opportunities may also influence people when they decide where to live. Living in New York makes sense when it’s the only place where you can find a job. When work becomes decentralized and remote, though, employees can effectively make more money by living in cheaper areas.

Data from the Pew Research Center show that internet access has grown considerably in rural and suburban areas over the last two decades. In 2000, only 42% of people in rural places used the internet. During the same year, 56% of suburbanites accessed the internet. In 2019, 85% of people in rural communities and 94% of people in suburbs said that they use the internet.

Despite improvements in technology, many business leaders have shown reluctance to remote working. The pandemic has forced them to reconsider this outdated idea, which could lead to a significant paradigm shift that embraces the value of working remotely.

Companies have already undertaken the hardest parts of setting up remote teams. Stay-at-home orders meant that businesses had to review and adopt software applications designed for remote workers. With these technologies now in place, some companies may decide that it makes sense to keep their employees remote to decrease overhead instead of bringing workers back to their offices. By keeping workers at home, companies may have to spend slightly more money on technology. However, in return, they can save a lot of money on overhead costs associated with real estate, energy, and insurance.

The combination of better internet technology throughout the country and an increase in remote work opportunities will make it even easier for ambitious people to move away from crowded cities.

rural home

Are Employers and Employees Rethinking the Future?

No one knows how people will respond to the COVID-19 pandemic. Once researchers develop a vaccination, employers and employees might go back to life as usual. Alternatively, they could be reconsidering their urban lifestyles as a way to prepare and protect themselves from future potential outbreaks as the world economy continues to globalize. If they feel less certain about the future, there is a good chance that many will leave crowded urban areas for places that offer more room to spread out.

If this pandemic has you thinking about moving to a more rural area to put some land between you and your neighbors, as well as allow you to source your own food, make sure to Find A Land Consultant and use the Land Connections property listing site to help find the perfect property to meet your needs.

Farmland

The Basics of Farmland Investing

Despite concerns in other areas of the economy surrounding the COVID-19 outbreak, now is still a good time to invest in farmland because the market is neither too saturated or thin. In fact, many investors are moving to investing in farmland as a safe haven. Plus, farmland has consistently yielded returns greater than 10% over the last five decades – so it is a proven good long-term investment.

If you’re interested in investing in farmland, you will need to learn the basics first though so you can make smart choices.

Top Reasons to Invest in Farmland

Investors point to a lot of different reasons when they explain why they choose to put money in farmland real estate. Some of the most popular reasons include:

  • The option to hold onto land until it becomes profitable to sell.
  • Transitioning the land to suit an emerging, high-profit market like organic produce or hemp.
  • Making money by leasing it to farmers.
  • Adding diversity to investment portfolios.
  • Scarcity. They aren’t making any more of it.

With the right approaches, farmland investing can give you an exceptional, one-time profit or provide a long-term source of income. Either way, it’s a relatively stable option that fits well into most portfolios.

What to Consider Before Investing Farmland Real Estate

Like any investment, buying farmland real estate comes with some risk. That means you should do some research and hire an expert land agent in your area before you invest in farmland. Learn about the following factors to make sure you choose land that’s likely to increase in value.

The Land’s Previous Uses

A piece of land’s previous uses can play a crucial role in your investment. If a former owner used chemical fertilizers, you might find it challenging to qualify for organic farming. If the land has sat unused for a decade, you may need to add a lot of nutrients to the farmland soil before you can grow crops.

The Soil’s Acidity and Nutrients

Crops only thrive when they’re grown in the soil with the right acidity and nutrients. Before you invest in farmland, get a soil test that measures the acidity and amounts of nutrients like:

  • Aluminum
  • Calcium
  • Lead
  • Magnesium
  • Phosphorus
  • Potassium
  • Sulfur

Without the right levels, you will either need to grow different crops or amend the soil before planting.

farmland soil

The Farmland’s Soil Drainage

Most crops grow best in soil that drains quickly. For most plants, you don’t want standing water that contributes to rot, blight, and mold.

You can test soil’s drainage by digging a shallow hole, filling it with water, and returning the next day. If the hole still has water in it, then you probably don’t want to invest in the land.

Surface and Mineral Rights

Buying farmland always gives you rights to the land’s surface. You may not, however, have mineral rights. If a previous owner sold the land’s mineral rights, then the mineral rights are not included in your investment.

Owning mineral rights doesn’t matter for some land. If the company that owns the mineral rights decides to extract oil, natural gas, coal, or other commodities from the property, though, the excavation process will disrupt farming and can even limit the amount of land available to farm.

Determine How Your Investment Will Affect Your Taxes

Investing in farmland could increase your tax burden. In most cases, you will need to pay property taxes. You may also need to pay state and federal taxes on income that you earn from the land.

farmland investing

Ways to Get Started in Farmland Investing

If you have a large amount of money, then you can start investing in farmland almost immediately. You just need a qualified land agent to help you find farmland real estate that will earn money.

Most people, however, don’t have thousands of dollars to buy acres of land. That doesn’t mean you cannot benefit from investing in farmland real estate, but you may need to take some additional steps.

Know How Much You Can Spend

You need to determine how much money you can afford to spend on farmland. Even if you need to borrow money, a sizable down payment should increase your profit potential.

Find a Funding Source

Traditional lenders often charge high interest rates that make it difficult for farmland to earn profits. If you get a low interest rate, then a conventional loan might work well for you. Keep in mind that you have alternatives, though.

Crowdfunding gives you a low-cost way to access the funds you need to purchase farmland real estate.

You could also co-invest in land with friends, family members, or business partners.

Use a Qualified Land Agent Before You Invest in Farmland

Make sure you use a qualified land agent when investing in farmland. Land transactions require specialized expertise. One mistake could make it difficult or impossible for you to get a healthy return on your investment.

Find a land consultant in your area and make sure the agent has experience in farmland transactions. Accredited Land Consultants, agents who have earned the ALC Designation, are know in the industry as the most experienced and educated agent in the industry for assisting with land transactions.

There are plenty of good reasons to invest in farmland, but you may need help from a land agent, lawyer, and CPA to make sure you choose a piece of land that will give you a strong return for your money.

industrial hemp land

What You Need to Know Before You Buy Land for Industrial Hemp

The industrial hemp industry is booming, especially as cannabis legalization continues to add new vistas of opportunity in a growing number of U.S. states. The share of agricultural land devoted to hemp quadrupled from 2018 to 2019, growing from 27,424 acres to whopping 128,320 acres according to a recent LandHub article titled Hemp: The Benefits Of The New Mega CropFinding just the right land on which to grow these crops, however, can prove challenging for farmers, real estate professionals, and investors. Let’s examine some of the most important points you must consider if you’re thinking about taking this potentially rewarding (but also potentially risky) step.

Deciding Which Industrial Hemp Products to Produce

One of the first considerations you’ll have to make when working out your long-term strategy is deciding what varieties of the crop you need to plant and raise to meet your goals and demand. Hemp and marijuana are derived from the same plant family, Cannabis Sativa, and are bred and used for different purposes. The primary difference between the two is the content of THC, the psychoactive cannabinoid produced by the plant, with hemp being defined as cannabis with 0.3% THC content or less. Your options may include:

  • Industrial hemp – A straightforward hemp crop can provide the raw materials for use in paper, plastic substitutes, fiberboard, rope, fabrics, and even protein substitutes for vegan and vegetarian foods.
  • CBD oil – Oils containing CBD (cannabidiol) are derived from marijuana plants; they may also include hemp-derived carrier oils. CBD oil has become increasingly popular for treating issues ranging from depression and chronic musculoskeletal pain to neurological disorders, cancer symptoms, and even acne.
  • Medical marijuana – Medical marijuana has been prescribed for the treatment of conditions such as glaucoma, nausea, epilepsy, Crohn’s disease, and PTSD.
  • Recreational cannabis – States that have legalized recreational cannabis may see substantial profits from taxing this cash crop, just as growers can make considerable money from providing it.

dog cbd oil

Obviously, you must understand your state’s laws on the growth and sale of cannabis before you can make any informed plans about what and how much of it you can and can’t grow. Passage of the 2018 Farm Bill defined hemp as separate from marijuana and allows production in all states. However, states may opt out of allowing hemp production and several still prohibit growing, so it is critical to be aware of your state’s status. In all instances, this is a highly regulated plant requiring careful attention to permitting, testing, transportation, and processing. The compliance requirements are paramount and can be challenging and expensive. In states that don’t permit the use or sale of recreational or medical marijuana, for instance, your options are limited to hemp. If you intend to buy land in a state like Colorado (which spearheaded the trend toward statewide legalization beginning in 2012), you may face no such limits, though local county and municipal laws do pose restrictions, so it’s still always important to check.

Who Is The Target Market For Your Industrial Hemp?

In any business, you must know your target market before you can stand any chance of success. Before you buy land for your future “hempire,” do your research to ascertain which consumer or industrial segments might have a genuine need for your crop. Once you’ve located your prospective buyers, you can market to them directly and effectively.

Another important aspect of pre-planning is estimating the size of your target market and the volume of its demand for your crop. Many hemp producers find themselves stuck with a massive overproduction problem because they misunderstood how much hemp their buyers actually wanted or needed. Market research is a must if you want to avoid this disastrous scenario.

industrial hemp land

Soil, Environment And Other Potential Problems When Buying Land For Growing Industrial Hemp

Hemp may be a remarkably versatile crop, but it isn’t the easiest plant in the world to grow. For one thing, it’s highly susceptible to mold, which can been known to infiltrate and destroy nearly half of many hemp crops. Even trickier is the issue of making sure that the hemp your land supports has a THC content of less than 0.3 percent. Any deviation above this level makes the plant illegal to sell in states that haven’t legalized psychoactive marijuana products for medical or recreational use, and usually results in having to destroy the crop.

Make sure that your land offers a prime environment for hemp growing. Seek out land that offers good drainage, a non-acidic pH level, and mild temperatures. and a generally humid climate. Arid regions reduce the potential for mold issues compared to humid climates, but will be more likely to require irrigation of the crop. In general, hemp will use approximately 1/3 less input of water, nutrients, and pesticides than a typical corn crop. 15 inches of annual rainfall or supplemented irrigation is a minimum requirement for full production potential.

Even the most welcoming soil and climate can lead to nothing if your land is spoiled by environmental toxins. The cannabis plant is a bio-accumulator that draws elements from the soil, so much that is has uses in phytoremediation, the cleanup of toxic elements by plants. Many hemp products, particularly oils, are processed as concentrates of the plant’s compounds, thus any contaminant or unwanted element is concentrated also, and could rise above allowable limits. That’s why, in addition to checking the nutrient levels in the soil, you’ll also want to have the soil and groundwater tested for lead and other dangerous contaminants before you commit to a purchase.

industrial hemp cbd

The Bottom Line: You Need a Land Expert

As you can see, selecting and buying land for hemp farming forces you to think about a number of factors, any of which could make all the difference between boom and bust. Make the process easier for yourself by both doing your own research to learn about hemp as well as consulting the proper experts, including an experienced land expert, ideally an Accredited Land consultant (ALC) who knows how to advise you every step of the way. Fortunately, RLI makes this step the easiest one of all — just head over to our Find a Land Consultant page!

Happy Hemping!

Kirk Goble, ALCContributing 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.

ranch cow

Seeking The Balanced Ranch

While Colorado is known for its world-class ski areas, fly-fishing, elk hunting, mountain biking, and music festivals, it’s also home to hundreds of producing cattle ranches that contribute mightily to the state’s economy.

While states at lower elevations may have self-contained cattle operations, where all ranching operations occur on the same property, Colorado is a different story, with multiple properties necessary to form a “balanced” ranch. The ideal combination is a productive home ranch at a lower elevation that has ample sunshine, excellent water rights, a good set of working corrals, adequate housing and shop buildings, and, most of all, productive hayfields that are capable of producing high-quality mountain hay. Secondly, the ranch needs transitional grazing lands for spring and fall pasture, as summer pastures are often not ready for grazing until mid- to late-June. Finally, as spring pastures are grazed off, a balanced ranch needs high-country grazing land. This can be in one of several forms—either in the form of a grazing permit on either Bureau of Land Management (BLM) or U.S. Forest Service (USFS) lands or on deeded private ground.

Let’s start the cycle of a Colorado ranch on January 1, for lack of a better date. It is cold and wintry. Cows are heavy with calves and struggle to find good feed and water. The ranchers are feeding hay and breaking ice. Only a month later, in mid-February, many ranchers start calving. Truly, it seems brutal to drop a wet newborn calf in a frozen snowbank, and losses sometimes occur if a ranch hand doesn’t detect a birthing cow in the middle of the night. But there’s a reason for this. The calves need to be strong enough to go up on the mountain.

The mountain? Oh, yes. The mountain. Colorado ranches have a seasonal cycle. Beginning in the spring, when snows melt and shoots of grass start to poke through the ground, the goal is to keep mother cows and their newborn calves off of producing hayfields so that the rancher can grow hay during the summer. The best solution is to bring the cows up to highcountry pastures with lush grass.

A bred cow can require up to three tons of hay to feed her through the winter. A few Colorado ranches produce up to five tons of hay per acre, but most ranches are lucky to get two to three tons. Consequently, it can require up to two acres of irrigated hay ground to feed one bred cow through the winter. Beginning in early to mid-April, ranchers start to move their herds away from their producing hayfields and onto transitional mountain pastures.

Keep in mind that the lowest elevations in Colorado are above 4,000 feet, and few year-round cattle ranches are located above 7,800 feet. While there are 53 peaks above 14,000 feet in Colorado, most ranches are located in that sweet spot between 4,800 and 7,500 feet in elevation. As the snowpack slowly recedes up the mountain valleys, ranchers get ready to move their herds off the home place to spring pasture on deeded mountain land or grazing leases. They brand their calves and castrate the bull calves before the herd goes onto the mountain. Most often, these pastures are in zones of shrub oak, sage, and open meadows at elevations between 6,000 and 8,000 feet. Sometimes the ground is deeded land owned or leased by the rancher, and other times it is BLM grazing leases.

ranchland cow

Of all the lands in Colorado, grazing leases and USFS or BLM permits are often the hardest to find. Many private properties at these elevations have been subdivided into 35-acre ranchettes, and competition is fierce for public land grazing permits. The goal is to find emerging green pastures for hungry cows, keeping them off the hayfields at home while waiting for higher mountain pastures to emerge from snowfields and grow lush mountain grasses. While lush, well-irrigated lowland hayfields can sometimes bring $7,000 to even $10,000 an acre, these middle pastures can command between $1,500 and $3,000 an acre in today’s market. Grazing permits themselves can command a hefty price tag as well. The government says that the permit cannot technically be bought and sold; the value, they say, is in the herd of cows that go with the permit. They can say that all they want, but nobody in their right mind would pay $3,500 for a broke-down old cow unless it came as part of a grazing permit, and many permits trade at high prices.

While many ranchers commence their calving seasons in February, others wait until March or even April. However, the majority of ranchers know that their calves need to be big and strong enough to make an arduous trip upcountry to their summer grazing pastures. It’s one thing to ease the cows and their new calves off the back side of the ranch for a month or two, onto private or BLM spring grazing leases. It’s quite another to push a bunch of cows and baby calves high up onto National Forest grazing permits at elevations of 10,000 feet or higher. Those cattle might be struggling through half-melted snowbanks in mid-June. They will encounter bears, mountain lions, and coyotes; bogs and poisonous larkspur; downed timber and deadfalls. While there are certainly losses, it’s surprising how many make it home.

Some ranchers are fortunate enough to literally open the back gate and turn their cows onto transitional BLM lands and then up to summer National Forest grazing leases. Others are not so fortunate and have to either truck the cows to the mountain or herd them on long, exhausting cattle drives. For this venture, calves born in February or March, having recovered from castration and branding, often weigh 400 pounds or more and are robust and strong enough for an arduous transition. A two-week-old calf weighing less than 100 pounds, however, will have a tough time of it.

ranch cow

Over the summer, the feed at high elevations can be fantastic. It’s common for calves to gain two or even three pounds a day as cattle graze on grasses and forbs that are often up to their bellies—while the rancher is busy growing hay on the home place.

Who watches over the cows on those summer grazing leases? Often, it’s the job of the “pool rider”. Often grazing permit holders are “pooled” with several other outfits, who together hire one or two cowboys (and sometimes cowgirls) to watch over the herds. The pool riders are equipped with a remuda of surefooted strong cow horses, and their job may be to mend range fence, doctor calves, chop down poisonous larkspur, pack salt, and move cows and calves to new pastures. They get a lot of saddle time, and horses that have spent a summer on the mountain are prized among savvy horse buyers.

Back at the ranch, the rancher and his haying crew are busy irrigating and haying, irrigating and haying, and stacking the hay in the barn in preparation for the coming winter. From time to time, ranchers might jump their horses in the stock trailer and pull them up to the mountain to check on their herds, but often the riding is done by the pool riders and sometimes “day riders” who are for hire on a daily basis—have horse, have saddle, can ride, want to work.

Of course, every ranch has to have a balanced herd as well. Cows need bulls, at a ratio of approximately 20:1. Older cows must be replaced with new heifers. Bulls go to the mountain with the cows and calves, but often bulls older than five years are not welcome in the herd, because they tend to sull up, become loners, and refuse to come down from the mountain, even as snow piles up chest deep. Many is the time that a stubborn old bull has died in a deep snowdrift.

As the days grow shorter, the mountain grasses dry up, and the aspens begin to turn yellow, the older, experienced lead cows know that it’s time to come home. Of course, every day on the mountain is a savings of pasture and hay on the home place, so sometimes the cows are left standing at the gate for a while. Usually, sometime between early October and November, the ranchers bring the herds down from the mountain and back to the home-place for the winter. Calves are sorted off, sold, and shipped to feedlots, usually weighing between 550 and 850 pounds. As the snows begin to accumulate, the rancher starts feeding hay, and the cycle begins again.

This cow-calf cycle of Colorado ranching has been going on well over 100 years. It’s commonly known that in order to run a profitable cattle ranch, a rancher can’t afford to pay much more than $8,000 per animal unit that the ranch is capable of running. Many productive cattle ranches were more treasured as “cocktail ranches” and subdivision developments because of their proximity to ski areas and beautiful mountain vistas. Other ranches still survive as working ranches, but owners have paid unsustainable prices per animal unit— sometimes $20,000 per Animal Unit Month (AUM) or more—simply because the owner is wealthy and wants to own a Colorado cattle ranch. Other operations are subsidized by private land elk and mule deer hunts, tourism, guided flyfishing, and growing other crops like hemp. On occasion, some ranchers prefer to run yearlings on those rich mountain grasses, backgrounding those beef cattle and putting on weight before they’re sent to the feedlot for fattening.

As you can see, a balanced equation is very important for the success of a Colorado cattle ranch. If one of the ingredients is missing—adequate hay ground, irrigation water, spring and fall pasture, and summer pasture—it can make ranching operations far more difficult and costly. Ranches that have all the key pieces in place can rest assured that their operations will run much more efficiently.

This article was originally published in the Winter 2020 Edition of RLI’s Terra Firma magazine.

Gary Hubbell, ALCAbout the author:  Gary Hubbell, ALC, is a Western States land broker, auctioneer, and personal property appraiser. Based in Western Colorado, Gary is a licensed broker in Colorado and Utah. He has sold farms, ranches, orchards, vineyards, mountain land, hunting properties, luxury homes, resorts, outfitting businesses, and commercial property in a wide geographical area, including Aspen, Steamboat Springs, Telluride, Durango, and many other hard-to-find locations. Gary is very familiar with conservation easement properties, having sold seven large easement properties. As an auctioneer, Gary has sold heavy equipment, livestock, classic cars, antiques, motels, development land, ranchland, guns, farm equipment, and even the World Record Elk antlers in Crested Butte, CO.

farmland for sale

10 Tips for Finding the Perfect Agricultural Farmland for Sale

Finding the perfect agricultural farmland for sale can seem like a difficult process. In truth, you probably will have to spend some time looking at and researching several properties before you find one that you love and is the right fit to meet your goals.

Use these 10 tips to make sure that the farmland you choose is right for your plans.

land environmental contamination

1. Learn About the Land’s Previous Use

You probably plan to use agricultural land as a farm, ranch, vineyard, orchard, or possibly even a timber forest.

The land’s previous use could influence whether you want to buy the property. Land that has sat unused for decades may not have many nutrients left for your crops. An area that was used for industrial purposes, however, could have toxic chemicals hiding in the dirt and water.

Research the land’s previous use so you can avoid threats and focus on finding a farm with healthy soil.

soil

2. Test the Soil’s Acidity and Nutrients

Before you buy farmland for sale, you should make sure that the soil has the right nutrients and acidity to grow your preferred crops.

Nutrients that you should learn about include:

  • Phosphorus
  • Potassium
  • Calcium
  • Magnesium
  • Sulfur
  • Aluminum
  • Lead

Too much or too little of these nutrients could determine whether your crops thrive or fail.

The soil’s pH range also plays an important role in how well your plants grow. Neutral soil with a 6.5 to 7 pH works well for crops like:

  • Beets
  • Alfalfa
  • Clover

Slightly acidic soil with a 5.5 to 6.5 pH makes a great place to grow:

  • Corn
  • Barley
  • Wheat
  • Peanuts
  • Cotton

Real estate land with a 5 to 5.5 pH should support:

  • Potatoes
  • Sweet potatoes
  • Blueberries

You can purchase a soil test to measure nutrient levels, or you can reach out to your county’s Extension Office. Many County Extension Offices offer free or discounted soil testing services.

If you discover that the farmland for sale doesn’t have the nutrients and acidity needed for your crops, then you will spend time and money amending the soil before you plant.

flooded field

3. Observe the Farmland’s Soil Drainage

Most crops prefer soil that drains quickly after a rain shower. Well-drained soil helps protect plants from diseases like stalk rot, root rot, blight, and molds. Standing water also creates breeding grounds from troublesome insects, including mosquitoes, aphids, and beetles that eat leaves.

You can improve a farm’s drainage by adding perlite, sand, compost, mulch, or vermiculite into the soil. Again, amending the soil will require time and money. If you want to start farming immediately, buy farmland for sale that already drains quickly.

farmland topology

4. Analyze the Agricultural Land’s Topology

Topology plays a crucial role in a farm’s success. Most farmers avoid land with steep hills because water can wash away necessary nutrients down the incline. If you want to buy land for sale in an arid region, then topology probably doesn’t matter as much. For example, plenty of people raise grapes successfully on hillsides in Arizona.

Just make sure that the agricultural farmland’s topography matches the needs of your crops.

5. Research Access to Resources

electrical power lines rural landSome agricultural land sits in the middle or outskirts of densely populated cities. Most farmland, however, is in rural areas. Depending on the agricultural land’s location, you may not have access to resources like water, electricity, and natural gas.

Some properties can give you a leg-up when it comes to resources needed. For example, a farm with a large pond, might give you access to all of the water you need for your crops.

If you cannot connect to the electrical grid or natural gas, though, you will face challenges using some machinery, controlling airflow through tunnels, and growing crops in hothouses during the winter.

In some cases, you can extend water and natural gas lines from municipal sources to your farm. The project could cost quite a bit of money, though.

6. Know Whether the Existing Infrastructure Meets Your Needs

Agricultural land involves much more than healthy soil. You need a farm infrastructure that helps you grow and sell crops. You can break the most important types of infrastructure into four categories:

  • Roads
  • Buildings
  • Irrigation
  • Electricity

Farmland roads need to accommodate large machinery like tractors, rollers, and cultivators as well as trucks.

Buildings should give you a safe place to store your equipment and crops. Think beyond having a good barn that protects hay from the rain. You may need to even look for buildings like grain silos, packing facilities, and refrigerated sheds that keep produce fresh.

Irrigation infrastructure could include anything from drip irrigation systems that run along rows of crops to overhead systems that sprinkle crops automatically. Before you buy farmland, make sure it has an efficient irrigation system that will give your crops the right amounts of water.

Also, keep in mind that electricity becomes scarce when you travel deeper into a farm’s acreage. Ideally, you have an electrical infrastructure that lets you turn on lights at night to operate equipment in the fields. Don’t expect access on every acre, though – That’s rare.

rural road

7. Determine How Easily You Can Reach The Farmland That’s for Sale

When you look at a map, the farmland for sale may seem to have a location right off a major highway or interstate. In reality, you may have to drive across miles of country road to get from the interstate’s exit to property.

You may not mind driving an hour from your farmland to the nearest major road. Consider, though, that you will need to haul heavy equipment and crops several times a year. The time and expense of driving your car 50 miles are considerably lower than the time and cost of hauling a 6,000-pound tractor along the same route.

8. Estimate The Distance To Distributors, Retailers, And Markets

You will also likely need to consider how easily you can reach the distributors, retailers, and markets that buy your crops. Every hour that you spend on the road is time away from your fields.

Since you want to build an efficient supply chain, look for agricultural land that puts you within reasonable distance of distributors and retailers. A centralized location that gives you easy access to several of the region’s cities and towns could help turn your farm into a successful business.

cell tower

9. Check The Area’s Cell Phone Reception

Today’s farmers need smartphones so they can stay connected to their employees, clients, and distributors. An area without good cell phone reception will make it difficult for you to contact the people who make your business successful.

You can use online tools to see whether an area gets good reception. The best test, though, is to visit the location and see how well your mobile device performs there. If you get poor reception, talk to your carrier about adding nearby cell towers, or if there is no other option you may want to choose a different property that already gets good reception.

oil pump field

10. Research Whether Someone Owns Mineral Or Gas Rights

Buying farmland for sale doesn’t mean that you own everything below the surface. Someone else could own mineral and gas rights. If they discover coal, natural gas, or other materials on your property, then they could have the right to enter your land and start mining.

As recently as 2019, the West Virginia Supreme Court upheld the right of mineral owners to use surface land to access minerals, even if doing so disrupts the surface owner’s business.

Conclusion

land agent

A lot of research goes into finding farmland that matches your unique needs. Before you invest in farm real estatefind a qualified land real estate agent to assist with your purchase who can help you pinpoint the best opportunities. Land real estate transactions require specialized expertise and experience, especially when it comes to finding the right farmland for sale. One discussion could save you from a disastrous decision that costs you time and money.

beach house coastal land

Selling And Buying Coastal Land By The Sea Shore

According to research by National Oceanic and Atmospheric Administration (NOAA), coastal counties of the US are home to over 126 million people, or 40 percent of the nation’s total population. However, the coastal land accounts for less than 10 percent of the nation’s land mass (excluding Alaska). As an Accredited Land Consultant in coastal North Carolina, I’ve experienced the unique challenges of land transactions near the water, and I’d like to share with you four main areas of consideration for anyone selling, buying, or investing in coastal properties.

1) Waterfront Property Considerations

Whether you are talking about ocean front, sound side, mainland water front, or on a river, you should know about the riparian rights and where exactly the title shows the property’s boundaries fall. This differs in each state, so double check your state laws for exact definitions and restrictions.

Verify that the water is indeed navigable, whether that’s by boat, kayak, canoe, or yacht. There is no such thing as deep water, what is deep to me, may not be deep to you, so there is room for misinterpretation. Determine the depth needed for its intended use(s) and, if possible, the owner should take the boat/vessel to the property as a test to make certain it will serve its purpose.

It’s common along the ocean for there to be an easement recorded for public enjoyment, public use, or for local governmental authorities to perform activities like beach re-nourishment, sand pushing, etc. Since you may own the section of the beach in front of your home to the high tide mark, the public and municipality probably still has the right to use and enjoy that space.  Any homes or buildings that are waterfront may NOT be re-buildable. If a storm damages the structure to a certain extent (determined by local codes and ordinances), you may not be able to rebuild that structure to its original state. You also may find, especially with older buildings, that new setback requirements could affect your buildable space on the land. Always check with local governmental authorities to determine the local rules and requirements.

beach house coastal land

2) Wetlands and Areas of Environmental Concern (AEC)

Due to the sensitivity of coastal watershed areas and wetlands, any proposed development should give consideration to any designated wetlands and how storm water flow and erosion may impact them. There are many types of flora, fauna, and animals that only thrive in wetlands, therefore, regulations exist to protect them. Find ways your plans can incorporate these areas into your design and you’ll probably score some brownie points with the planning department.

If there are wetlands on your survey or plans, you’ll likely need to get the Army Corps of Engineers to come on site for an evaluation to determine exactly where and what kind of wetlands you have. This can take some time, so plan for that during your due diligence examination of the property. There will likely be restrictions on development near wetlands such as additional setback requirements, erosion control measures, and storm water runoff plans. Knowing a good coastal engineer and surveyor will greatly help you get a plan together more efficiently that can be easily approved. If you must disturb wetlands, mitigation banks and conservation easements may be an alternative to achieve your goals. Your engineer should have contacts at a local mitigation bank to work through those challenges.

sunset coastal land

3) Insurance Considerations

Investigate if the county/city/municipality/town is part of the National Flood Insurance Program (NFIP). The NFIP’s Community Rating System (CRS) is a voluntary incentive program that recognizes and encourages community floodplain management activities that exceed the minimum NFIP requirements. Participation in this program provides discounts to flood insurance policy holders because their community is working to reduce flooding damage to properties, strengthening and supporting the insurance aspects of the NFIP, and encouraging a comprehensive approach to floodplain management.

Not all communities are part of the NFIP, therefore, property owners won’t be able to purchase Federal Emergency Management Agency backed flood insurance. The only option otherwise is a private flood policy for your structures, which can actually be more affordable and provide better coverage. Compare both types of policies anyway and make sure the coverage works for your intended use, you may be surprised at the extras a private policy offers. This is a great reason to use a local insurance company near your property who understands flood insurance.  Most people forget about the other insurance policy you will probably need, which is wind and hail. Wind driven rain and hail can create damage that isn’t always apparent, but can create a lot of problems. Mortgage companies will likely require it, and proximity to the ocean is a factor, so be prepared. Properties that are 30 miles inland can still be in a wind zone, requiring the additional coverage.

beach coastal property

4) Highest and Best Use 

People love to live near the water, but a land practitioner must remember that not all land is meant to be a housing development. With all of the challenges we’ve covered, you can imagine there are tracts of land that some think are just unusable, which is not the case. Alternative options such as solar, wind, and organic farming are showing up near the water on properties without suitable soils for septic. Depending on your seller’s financial goals, maybe conservation easements or putting land into a mitigation bank would bring a higher sales price. Think outside the box, there’s a buyer for every parcel. Affordable housing options are limited in coastal communities because the higher land prices won’t support a lower-priced product. Zoning restrictions controlling density near Areas of Environment Concern could further limit a developer. Talk to your local planning or zoning office to find creative ways to be able to offer affordable, workforce housing options in your community.  Approximately 446 people per square mile live in coastal counties, and they need goods, services, and retail options. Getting the right mix between tourism in coastal areas creating a short term economic boost and providing year-round jobs and industry is the key to having a robust, year-round economy.

This article was originally published in the REALTORS® Land Institute Winter 2020 Terra Firma Magazine.

Christina Asbury, ALCAbout The Author: Christina Asbury, ALC, is with Coldwell Banker Sea Coast Advantage in Sneads Ferry, NC. She serves has been a member of RLI since 2007 and earned her ALC Designation shortly after in 2008. She has served on RLI’s Future Leaders, Education and Government Affairs Committees over the years and is active in her local RLI Carolinas Chapter.

New Data and Market Analysis for Land Brokerage Site Selection and Feasibility

Today, technology and data are changing more rapidly than ever before, transforming the commercial real estate practice at every iteration. Far removed are the days of fold-out discounted cash flow analysis reports, maps plastered with rub-off decals, and microfilm-powered due diligence. Likewise, disruptive companies such as Amazon, WeWork, and Airbnb are changing the way we use, analyze, and value property.

Due to unprecedented advances in data and technology, the tools, devices, techniques, and resources we relied upon decades ago – or even last year – can quickly become obsolete. Whether you’ve been in the business three years or 30, a tune-up may be necessary to stay abreast of the latest data sets and metrics available to commercial real estate land professionals for analyses and site selection.

New Economic Metrics and Resources for Site Selection

We have been conditioned in our training that job growth drives demand for commercial real estate and that the government’s Bureau of Labor Statistics (BLS) is the resource to consult. Due to dated methods, the BLS often struggles to accurately estimate employment growth. For more reliable data, look no further than ADP’s National Employment Report (NER), produced jointly with Moody’s Analytics, and LinkedIn’s Workforce Report with Skills-Gap Analysis.

ADP processes the payrolls for approximately one-fifth of the nation’s private payroll employment, and its monthly employ- ment data is a credible estimate of private employment activity.

LinkedIn’s Workforce Report is a powerful supplement to ADP’s National Employment Report. The report draws on employment data from the more than 190 million workers in the U.S. who have LinkedIn accounts. LinkedIn’s monthly jobs report also includes invaluable skills-gap analyses at an MSA level stratified across 50,000 employment sectors, from brokers to welders. If you are engaged in land brokerage site selection or advise companies on site selection decisions, LinkedIn Workforce Reports are a must- have in your toolkit. Had Amazon utilized the LinkedIn Workforce Report with Skill-Gap Analysis before making its HQ2 split decision, it would have known that New York ranked worst for available skilled workforce – below even Seattle or San Francisco.

It’s also prudent to seek out non-government sources for critical economic measures like gross domestic product and small business activity. These will come in handy during a government shutdown or natural disaster. The government does not produce data during a shutdown, and the data it produces during times of emergency, like hurricanes or wildfires, is often delayed. As a result, you may need to supplement with additional sources of on-demand data.

So where should commercial real estate professionals turn for this business intelligence? A good global resource is Trading Economics. Leveraging official sources, the site offers verifiable data from 196 countries including “historical data for more than 20 million economic indicators, exchange rates, stock market indexes, government bond yields, and commodity prices.”

train tracks commercial real estate

In addition, a great proxy for GDP is the rail traffic data produced by the Association of American Railroads. The Rail Time Indicators report is an invaluable economic resource that anyone engaged in industrial real estate should have – and never leave home without. Weekly and monthly rail traffic data and the more comprehensive RTI report tell us what commodities and goods are moving, where they’re headed, and at what volumes – solid, reliable data to ascertain a true measure of economic growth.

For a powerful one-two punch of construction data and insights, check out the Association of General Contractors (AGC) and the Engineering News-Record (ENR). AGC produces a monthly survey that provides a thorough understanding of what general contractors are experiencing and forecasting, including construction materials, spending, and employment.

A perfect pairing with AGC, ENR offers a monthly periodical with a construction economics section and a 20-city index that details current and historical data on actual material and labor costs.

Rethinking Development for the Modern E-Commerce Supply

The following section of the report contains adapted excerpts from the Alabama Center for Real Estate’s report, “Logistics Infrastructure: Transformational Opportunities.”

The horseless-carriage supply chain from the 1950s cannot support a modern e-commerce supply chain that is growing at a rate of 25 to 30 percent per year. The state of the country’s aging infrastructure is not only inhibiting future economic and real estate development, it also forces existing industry to relocate to destinations that have modern logistics infrastructures. In 2019, logistics infrastructure adequacy is as important a consideration in site selection as workforce.

Take a look at the locations of new fulfillment centers for Amazon, Walmart, Target, and home improvement retailers. They are all near intermodal hubs – places like Bessemer and Mobile, Ala.; Columbus, Ohio; Polk County, Fla.; Greenville, S.C.; Atlanta; Dallas; Denver; and even Tucson, Ariz. One can also look to the locations for new aircraft, auto, and machinery manufacturing plants in Alabama, Georgia, South Carolina, and Texas. Logistics infrastructure analysis – roads, rail, intermodal, port connectivity, utility costs, and workforce – is now integral to site selection studies and investment analyses.

Commercial Real Estate warehouse industrial

E-commerce also continues to drive demand for industrial warehouse space, with another 800 million to 1 billion square feet of new development expected across the U.S. over the next three years. Are your logistics site selection and investment analysis skills up to speed to aid in this explosion? Are you familiar with modern design specifications that call for higher clear ceiling heights or expanded truck courtyards to accommodate more double-trailer trucks as a result of the implementation of electronic logs for truck drivers?

And what about the feasibility of tent warehouses, which Amazon is testing in Memphis, Tenn.? These innovative warehouse designs have no columns, cost one-third of conventional masonry warehouses, and can provide clear ceiling heights of 30 feet or more.

What’s more, the ongoing innovation in traditional construction design and materials for all property types challenges our cost estimation and market feasibility skills, much like modular did in housing decades ago.

Are price or rent per square foot and traffic counts no longer the appropriate units of measure for determining price or market feasibility? Should cubic volume be a consideration, particularly in industrial? What about traffic and online versus in- store sales allocation in retail, especially with the pervasiveness of e-commerce? Consider the changes in retail real estate.

Same-store comparable sales and percentage rent clauses are nearly as extinct as branch banks.

Parking ratios also are changing. While they may be declining for office due to ride-sharing and the promise of autonomous vehicles, they are rising for retail as more space is repurposed from transactional to experiential, where parking demand is higher for restaurant and service uses (gyms, spas, etc.).

People stay longer at an experiential-use site compared to a traditional store, where people run in and out to purchase goods. In the industrial space, warehouses require larger sites and more parking to accommodate double-trailer truck hauls as well as employee parking in the fulfillment portions of these locations. The opposite trend is occurring for hotels and many types of multifamily, such as student housing. Universities – and the towns in which they are located – are realizing that fewer students own and use cars like previous generations. They use scooters and ride-sharing, or they rent electronic vehicles available on campus. Hotels are realizing a 25- to 40-percent reduction in patrons requiring overnight parking as they pivot from rental cars to ride-sharing.

The point is, traditional measures are changing. If historical data sources fail to adapt, then those measures will become be less relevant as users move toward new metrics. This adaptation is critical in that it allows commercial real estate practitioners to translate these historical measures into meaningful current data for analysis and valuation.

Moreover, the new tools and data resources developed to meet these challenges are coming from unlikely sources. Instead of using car traffic counts as a proxy for retail sales at a shopping center, telecom companies like Verizon have developed their own index to analyze online shopping traffic and patterns.

There’s clear value in looking at mobile phone traffic for retail and comparing same-store online and in-store sales. With the current ever-evolving landscape, it’s hard to separate technology from the retail industry; sources like Verizon are helping bridge that gap to provide a more accurate picture for commercial real estate analysis.

Recently, Develop LLC, an opportunity zone REIT, created the first opportunity zone index that evaluates each of the 8,700 opportunity zones based on a variety of metrics, including population density, employment, and infrastructure.

Which traditional property measures require rethinking? The short answer: all of them.

A Way Forward

For all these advances to translate into vibrant economic growth, local governments need to recalibrate, but it will take a joint effort by government and industry professionals. To this day, for example, many municipalities have yet to adopt adaptive reuse ordinances to support the repurposing of existing vacant retail buildings while preparing for the new opportunity zone program. Local governments are behind in understanding changing parking trends, revenue loss from online retail growth, and how tax assessments are impacted for real estate that is increasingly a going concern.

phone screen

The secret to enduring success in commercial real estate is simple – never stop learning, never become complacent. Proactively adapting to the latest data sources and technology in valuation and financial and market analyses is vital. It’s a matter of keeping your career engine purring or being left behind by your competitors, stalled roadside.

KC ConwayAbout the author: K.C. Conway, MAI, CRE, is the Chief Economist for CCIM. Conway is also the Director of Research and Corporate Engagement at the Alabama Center for Real Estate. With more than 30 years of experience in commercial real estate, Conway is a nationally recognized expert and speaker in the industry.

A New Development Matrix for Today’s CRE Industry

By Mark Van Ark, CCIM, SIOR

CRE industrial commercial building

Many commercial real estate land professionals may be familiar with James Graaskamp, Ph.D., SREA, CRE, and his early work on real estate development, “The Fundamentals of Real Estate Development,” published nearly 40 years ago. In it, he created a rather intricate workflow and description of the development process outlining the political, social and enterprise components. The process was so involved, however, that most needed classroom guidance from Dr.

Graaskamp to fully understand the process and its many nuances.

Fast forward to 2012. Daniel Kohlhepp, Ph.D., MAI, with Johns Hopkins Carey Business School’s Edward St. John Real Estate Program decided to take Graaskamp’s work one step further and make the whole process more accessible. Kohlhepp incorporated his own personal development experience to create a new, more comprehensive real estate development matrix, expanding Graaskamp’s three stages to seven. As a result, the new development matrix provides a clear roadmap of the entire real estate development process from the land banking stage to the redevelopment stage: land banking, land packaging, land development, building development, building operation, building renovation, and site redevelopment. It’s a new matrix for today’s commercial real estate professional. Much like employment data and the other metrics and data sets discussed in the article, a new matrix was needed to reflect the advances and sophistication of today’s development process.

Three years ago, CCIM Institute leveraged Kohlhepp’s matrix as the linchpin in the CCIM Development Specialty Track series, which takes a deep dive into all seven stages – from the land banking stage to the redevelopment stage – and incorporates real-world application every step along the way. There are four stages of Kohlhepp’s matrix that are of particular interest to the land brokerage practice – Land Banking, Land Packaging, Land Development and Building Development. Gaining clarity and a greater understanding of the language, workflow, goals and hurdles of developers helps create value and deepens relationships with the development community.

Editor’s Note: This article is an adapted excerpt from CCIM Institute’s 1Q2019 Commercial Real Estate Insights report titled “Long May You Run: An Essential Commercial Real Estate Tuneup.” For the full report, visit www.ccim.com/insights.

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

hiking recreational land

Need To Knows For Buying Recreational Land Right Now

America is a land of wide-open spaces and with all its natural wonders how can you ever decide where to buy? What do you need to take into consideration?

My first consideration is made when considering the recreational opportunities desired. it sounds basic but you’d be surprised how easy it is to forget at the start that you need to have an end in mind. For example, for whitewater rafting you have got to have a river or if trophy whitetails make you heart race, let’s talk about deer habitat. You can’t have hiking trails without land anymore than you will have trophy bass without water.

bass fishing recreational property

Now that you have a idea of what you want to do with your time lets talk about how you get there.

I would recommend you start your search by talking with a Accredited Land Consultant (ALC) – find a land consultant. These are men and women that have spent years in the land business, completed education to enhance their ability to handle land transactions, and are masters of all facets of land sales. Most are outdoors man who live the lifestyle as well, hunting, fishing, etc.

If you decide that you want a property that can be managed for trophy deer your ALC will help you determine if the property you are looking at has the qualities it will need. Perhaps you will need a private wildlife biologist, or maybe you’ll need a heavy equipment operator that can clear travel lanes or create a pond for year-round water.

If you are considering buying a parcel that is in a national forest, have you considered all the recreational opportunities that just outside your door? Most national forests allow hunting and fishing on their lands as well as ATV trails.

If you are a fly fisherman, there are thousands of miles of private land with trout streams running through them. Imagine what a legacy you will leave behind if three or more generations all grew up fishing the same stream at grandpa’s place.

This just a drop in the bucket of all the different exciting opportunities that exist beyond the sidewalks and streetlights. Happy hunting!

About the Author: Tim Hadley, ALC, is an agent with Keller Williams Realty in Gladstone, MO. He joined the REALTORS® Land Institute in 2017 and is currently a member of their Future Leaders Committee.

 

kasey mock

About the Author: Kasey Mock is the Director of KW LAND Division at Keller Williams Realty International. Mock is a member of the REALTORS® Land Institute now serving on their Future Leaders Committee. Make sure to check out his break out session diving further into this topic at the 2018 National Land Conference in Nashville, TN, in March.

blockchain real estate

Blockchains in Land Real Estate

Blockchain in land real estate has not quite yet been accepted by business leaders. Misconceptions and misinformation have created an environment that is delaying adoption. While no technology is a universal perfect fit, we should look for situations that benefit from blockchain’s best features. We should take the time to understand blockchains in order to maximize their potential as an asset that can have positive impacts on business.

Understanding Blockchain

Think of blockchain technology as a ledger that is distributed to many parties. Just like a published book, the information recorded in the ledger is permanent, cannot be altered, and everyone who needs a copy of the ledger has one. If you want to change the information that has been published, you have to ensure changes are made to every copy of the book. In terms of a blockchain, the information is across the internet on various computers. The difficulty only increases as the number of books in circulation increase. Another point to note here is that high circulation publications are difficult to completely erase from history.

Just like any new technology, there is a vocabulary associated with blockchains. Breaking down the word blockchain, block being a log of stored data and chain referring to how the data links together, is a good place to start. Then you start hearing words like cryptocurrency, token, coins, and smart contracts, all of this can be overwhelming. For now though, the most important technical term to remember is the overall synonym for blockchain: distributed ledger. As a business leader, keep reminding yourself that blockchains are tamper-proof records with many copies.

ledger

Each party operates a copy of the blockchain. The blockchain is simply a reserved part of your computer disk. There are two competing ways information is distributed.

Method 1 – This one is called Byzantine Fault. When you record a new transaction, it is first sent out to all computers to make sure they have a copy that can receive the change. If a majority of the computers agree, your local copy is then changed and all others are alerted to the change.

Method 2 – This one is called Mining. When you record a new transaction, thousands of “miners” are notified. Each one tries to come up with mathematically unique representation of the transaction. The first person to come up with the solution earns part of the fee (every transaction requires a token). This is a tremendously wasteful exercise (from an electricity standpoint) and has been heavily criticized. It has resulted in mining farms operated by folks looking to create revenue.

I have been asked, “If blockchains are a record-keeping mechanism, what is wrong with using databases the way we do today?” My answer is that there is nothing wrong with what we do today. The industry has an enormous investment in documents so any suggestion that we should move millions of them into a blockchain is unrealistic. The effort would be a needless waste of time and storage capacity. However, using the book example, a better approach would be to record the location of a book and then to document any changes that have been made since its publication as new events are added.

The difference between a database and a blockchain is like the difference between a driver’s license and a driving record. Information on your driver’s license is subject to change over time. Your weight, address, and appearance (photo) are best stored in a database because they change over time. Now consider your driving record. It is a series of events that are not subject to change. In a database, the information stored there is subject to change. With a blockchain, the information is a permanent track record of events.

Blockchain in Real Estate

Short, time-based events are easy to record with a blockchain. Asset management activities generate excellent examples of events in commercial and residential real estate. Some of the activities that create events are:

  • inventory
  • maintenance activities
  • tax payments
  • improvements

Using blockchains, builders and developers can quickly identify who supplied materials, where they were used, and how they were handled. This is why many supply chain companies (especially food handlers) are adopting blockchains. Blockchains are good at asset management because they create trustworthy records. They create tamper- proof records and no special software, services, or procedures are needed to recover from catastrophic outages. Damaged computers simply reconnect to the network and recreate the lost information from other copies.

The Real Estate Standards Organization (RESO) has created a workgroup that thinks events are applicable beyond real estate brokerage. Events allow real estate professionals to easily exchange information between lending, public records, and insurance companies. The workgroup is not facilitating the exchange of underlying documents, simply a ledger of events (think of a timeline).

Caution Ahead

We should consider the impact of legislative and regulatory efforts to protect privacy on blockchains since they contain tamper-proof, permanent records. If information written to a blockchain can never be erased, personal information like account numbers, passwords, or contact information should not be recorded. The security community calls this kind of information Personally Identifying Information (PII) which has “the right to be forgotten,” according to GDPR. We can expect to see continued legislative and regulatory efforts to protect privacy, so it is important to keep this in mind when implementing blockchain technology in the industry.

Legislative and regulatory actions intended to help consumers can actually end up hurting adoption. A review of actions at the state level published last year showed that blockchain definitions used in legislative language varied significantly between states. We should think about one of the main points in The High Cost of Good Intentions by John F. Cogan; government strives to act in the best interest of the citizens but ends up stopping innovation that is designed to help them. We should be working with local, state, and federal governments to make sure they understand the impacts of their actions.

blockchain

Still Learning

Earlier this year, I attended the 2019 National Land Conference hosted by the REALTORS® Land Institute (RLI) in Albuquerque, NM, to discuss blockchain technology. One of the challenges I noted was implementing blockchain technology at the county level. The decision-making process at over 3,000 counties slows down adoption significantly since millions of records would have to be transposed.

I was pleasantly surprised to find blockchain uses I had not yet considered. Possible uses for blockchains in land real estate include:

When they were first mentioned, I assumed the issues were similar to those faced in the County Recorder’s office. I came to realize the value of RLI.

We have established that blockchains are good at capturing small events. When a property changes owners, what is purchased can be the result of subdividing or combining tracts. Many county recording systems have difficulty combining properties. Blockchains are good at tracking splits and combinations because they are optimized to record event history.

Recording water rights are more complex because both surface water and groundwater need to be considered. However, as the population increases, simple first-in-time and first-in-right historical surface water rights are being challenged by legislation and regulation. These complexities make recording surface water rights with blockchains an ideal solution.

Groundwater record keeping can be more complex than a simple rule of capture situation. Drilling, natural erosion, and abuse of the aquifer are all conditions that can be detected with periodic testing.

Blockchains can be used to reference test results creating a tamper-proof, time- based record. Indigenous land rights are another area of land transfer that can impact development plans. Blockchain technology is ideally suited to create records that survive multiple transfers and do not need to be routinely researched.

I saved mineral rights for last because they are more complex than the aforementioned items. With water, there are two facets to consider: surface and groundwater. The courts still see disputes over the definition of what constitutes a mineral. Royalty agreements routinely include many parties and need to be researched before the transaction is closed. These complexities can be captured using blockchains.

The effort to record mineral rights with blockchains should avoid capturing old records. Instead, new research should be recorded from this point forward. Many of the records are very old and are needed for historical backup. Scanning and digitizing historical documents do not help the process of documenting mineral rights. Recording mineral rights agreements and interpretations in blockchains create tamper-proof records that many parties can reference electronically.

blockchain bitcoin crytocurrency

Cryptocurrency and Smart Contracts

Due to the well documented volatility of cryptocurrency, it is unlikely that we will see wide scale purchasing of property using cryptocurrency. The banks are not ready to lend this form of currency yet and commissions will probably not be paid this way. The number of cryptocurrency property transactions will never exceed today’s volume of 100% cash transactions.

This is a good time to clarify some blockchain jargon. Cryptocurrency denominations are typically called tokens or coins. Tokens must be purchased before use and are not typically interchangeable between applications. Buying and selling tokens is still a complex process, but the community is trying to simplify it. There have also been improvements to token interoperability between blockchains.

Compensating work is a much better application of cryptocurrency. Instead of closing the entire transaction, you can order just those services you would like to be performed electronically. Services can have conditions such as “do not execute during business hours,” or more complex rules, such as, “on the fourth day, transfer $1,000 to this system.” The logic that controls these kinds of services is called a smart contract. Smart contracts are not the same as legal contracts. A traditional legal contract is the outcome of negotiations and often contains attachments, addenda, and amendments related to the transaction. Smart contracts are not unique to a specific transaction. They can operate on a transaction but are not unique to the transaction. Smart contracts only represent conditional logic.

A good example of a smart contract can be found in fund disbursement. The hard part of designing smart contracts is capturing all of the options within a request. Imagine a vending machine that you can use to order transaction services. If the right number and type of tokens are inserted, you can select an in-stock item. The machine releases the item (i.e., the smart contract is executed). If those conditions are not met, the item (if there is one) is not released. The options you want can affect the number of tokens required to select the item.

Final Thoughts and Application

Do not ignore blockchains. Pretending they will not emerge will not stop them. You do not have to understand them at a technical level. Look for blockchains to emerge within business practices that need improvement, especially in the record-keeping area.

The biggest factor that can stop the widespread adoption of blockchains is resistance to change. Business leaders have a fiduciary duty to manage the risk, which includes being wary of unintended consequences. Until the risks are known and at least partially mitigated, policies do not change. Business leaders still need more education about blockchains before they’ll be comfortable with adoption.

Thinking about how blockchain could benefit your real estate business? Practice looking for applications that need both permanent records and require access by many parties. Blockchains will probably enter the industry through applications in ways that most will not even know they are using them. For now, just stay aware and keep an eye out for potential uses in your business.

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

Mark Lesswing NLC19 speakerAbout the author: Mark Lesswing is a Blockchain Entrepreneur who holds a Bachelor of Science degree in Industrial Engineering from Lehigh University. He started programming robots just out of college and, in 1988, began working with object-oriented programming. Mark has worked for large database vendors such as Sybase (as a startup) and Oracle spending a summer in Europe setting up international operations. In 1992, he launched his own consultancy and was involved in corporate turnarounds. Mark joined the National Association of REALTORS® in 2001 and as the Chief Technology Officer was a tenacious advocate for data standards and innovation. He is a frequent speaker at major trade conferences and is listed in the International Who‘s Who of Information Technology and the National Register of Who’s Who in Executives and Professionals.