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Land Investment

Growing Green: An Investor’s Guide To Investing In Land Real Estate

We believe investing in land real estate starts with the why. For a broker to serve a client well, they need to understand why a client wants to start investing in land real estate. Often, the why has little to do with financial issues. Why do they want to invest? What is important to an investor? Are there are financial, emotional, and recreational benefits to investing in land for them?

Once we understand the why, then it’s a matter of figuring out the financial entry parameters for the investment – total dollars to be spent, desired geography, the target rate of return, etc. After we learn the big picture parameters, we can help shape expectations. Setting expectations at this stage is critical. In all areas of land investing, so much of the long-term financial success hinges on how well we do in helping a client achieve realistic expectations to purchase an asset. Buy low, sell high isn’t a complicated idea, but it’s very hard to execute (especially on the buy side).

investing in land real estate

It is important for the broker to discuss this and help the client consider the liquidity of the land investment. This discussion will help the client keep in view the ‘long-game’ with the prospective sale of the asset, which may be years down the line. As brokers and trusted advisors to our clients, having that exit strategy/discussion is important. Take notes, and make sure the client knows and remembers how and why they chose to do what they did.

Investing in land real estate is one of the oldest investments in the world. The significant wealth of the world originated with land ownership. Land is also traditionally one of the most conservative investments, with land held by families for generations. Institutional investors have named land as a new asset class.

Changes in technology, world demographics, and government policies have caused land income and land prices to increase. The financial performance of land as an investment has offered financial stability, steady earnings, and diversification from other investments. Land earns well compared to other assets.

Our team of farmland professionals helps individuals, families, and organizations buy, sell, and own income-producing land – primarily for those who do not provide their own labor or machinery. We professionally manage 2,400 farms with 550,000 acres for our clients.

asset return characteristics chart for investing in land real estate

Land is a stable investment. However, there is risk to managing it. An investor manages risk through the selection lease or operating arrangement, farm location, soils, crops, water quality, and quantity. Each of these factors is predicated on geography. Buying land in the corn-belt has a different risk profile than buying land in the West, Delta, or Southeast.

Our team of farmland professionals helps individuals, families, and organizations buy, sell, and own income-producing land – primarily for those who do not provide their own labor or machinery. We professionally manage 2,400 farms with 550,000 acres for our clients.

Land has unique characteristics, compared to other real estate and securities:

  • Land has the potential for perpetual income. If owners are good stewards of the land and maintain and improve the land, the land will produce income
  • Land produces tangible production – something Whether the land grows commodity crops, veggies, livestock, or timber, it is real production.
  • Quality land builds and maintains value through a combination of soil, location, water, climate, logistics, and community. Selecting land for investment allows the investor to hand pick the location and characteristics that help maintain value and position for future growth in income and

Government policies shape and influence the land use, ownership, and potential future uses. Land ownership offers stability with changing government policies. Many of our governments have difficulty managing their economies and lack the fiscal discipline to balance their budgets. There are few investments which offer financial performance based on producing food and tangible commodities that adjust for inflation and economic changes.

The technology revolution is impacting land efficiency, water management, genetics, cultural practices, and food safety – all which impact land values. Land production and income is a result of improving yields, quality of production, production efficiencies, and demand for food, fuel, and fiber for a growing world population. Examples include average corn yields increasing by 400% from the 1930s to today, and productivity improvements with labor content today for an acre of corn or soybean production of less than one hour per acre per year. One American farmer now feeds an average of 116 people.

Land values are directly correlated with the benefits received from the land. As productivity, yields, and prices have increased, so have land values.

Finally, investing in land real estate can provide additional benefits beyond pure financial rewards. In addition to producing something for the world, you have an environmental benefit and the recreational components of hiking, hunting, fishing, and pride of ownership.

How do you participate in land ownership? You do not need to live on the land and operate and manage it yourself. There is professional assistance and an active land rental market. Professional management of your land investment is available. There are thousands of little decisions to make while managing and improving the value of your land, all of which can make a larger difference among land investment results than people would imagine. The relationship between an owner and their manager/operator is special. They share a connection to the land and a relationship to making the world a better place.

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

Randy Hertz, ALCAbout the author: Randy Hertz, ALC, is CEO, broker, and farmland professional with Hertz Farm Management and Hertz Real Estate Services, specializing in land brokerage and management. He is a senior instructor for the REALTORS® Land Institute’s LANDU Education Program who has a bachelor degree from Iowa State and an MBA from Harvard Business School.

flooded field

Thoughts on Flood Recovery for Farmers

With record floods receding all along the Missouri river valley, producers are facing a daunting clean up. With sand up to five feet deep deposited over thousands of acres of land, when it comes to flood recovery, how do you clean it all up?

Before we discuss how to clean it up, you may be asking “Why do I need to worry?” After the 1993 floods, many producers attempted to just plant in their field as they always had. Some areas didn’t produce, and most that did dropped from 75 bushels per acre to about 15 bushels. No one was happy about that and we started looking for ways to get our fertility back.

Federal disaster grants are available to help with cost, but they are capped at 75% of the fair market value of the land before the flood.

flood recover farmland

First, you must remember that the U.S. Army Corps of Engineers prohibits dumping it back into the river channel. They consider it contaminated, preventing its introduction back into the river. For areas with less than a foot of sand deposits, deep disking is usually the most cost-effective way of dealing with it. This will turn up some organic material for our soil.

Now. to address areas with sand from one to ten feet we turn to a track hoe. With a 180-degree swing, and bucket widths up to 5 feet wide, you can reach down and get the good black dirt. Once you start, a large machine can turn over nearly an acre per day.

This works out to about $2,500 per acre for the rehab cost but, at 70 bushel beans vs 15 bushels per acre, it seems like the only approach that works. If the land is now only worth $2,000 per acre, but you bought it for $5,000 per acre years back, it must be productive enough to cover the loan. So, we continue to rehab section by section to restore the value to this once fertile delta.

About the Author: Tim Hadley, ALC, is an agent with Keller Williams Realty in Gladstone, MO. He joined the REALTORS® Land Institute in 2017, serving on the 2019 Future Leaders Committee.

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.

Qualified Opportunity Zones

Qualified Opportunity Zones

protect property

How to Protect Your Property from Trespassers

Courtesy of National Land Realty

When you invest in a property, you don’t want to be worried about trespassing or theft.  It doesn’t happen too often, but if it does, you want to make sure you’re prepared and have done everything you can to prevent it from happening again. Coming up with a plan to protect your property and prevent trespassing even when you’re not always present on your property will save you a lot of time and money in the long run. Here are some things you can do to protect your property from trespassers:

  1. Put Up New Signs

This may seem like a common-sense thing to do, but it’s the easiest and cheapest task to add to your plan. Putting up new “no-trespassing” signs will show people that you are alert and frequent your property often. Rules for putting up signs on your property vary from state to state. So, make sure to check with your local land authorities on how to set them up correctly.

protect property

  1. Get to Know Your Neighbors

This one’s important. If you’re the new owner of your property, you’ll want to meet the owners of the land next to yours. Even if you’ve owned your property for several years already, it’s still wise to introduce yourself to the neighbors. Friendly neighbors are sure to keep an eye out and let you know if they see something suspicious.

  1. Conduct Regular Inspections

Be sure to set up a regular schedule of times throughout the year to walk your land. Go through your property each time, tracing boundary lines and make notes of any significant changes or anything specific you want to remember. Later, you can look back on your notes if you ever see something that looks a bit off. This can help you determine if someone has possibly been trespassing on your property.

search property

  1. Limit Access Points

Having a “one road in and one road out” system will limit the amount of access points for trespassers to make their way in. Having a gate with a lock at the entrance also helps with this.

These are just a few simple and quick things you can do that will help protect your property from trespassers. By doing these four steps, it’s not guaranteed that you’ll never have any trespassing problems, but it does mean that you’re prepared, and potential trespassers will certainly see that!

About the Author: National Land Realty is a full-service real estate brokerage company specializing in farm, ranch, plantation, timber and recreational land across the country. NLR currently represents land buyers and sellers in 20 states.

Disney World: The Greatest Land Story Of All Time

The story of how Disney World’s land was bought is as fascinating as any of Walt’s fairy tales. Who would have guessed that buying the land for such a wholesome place like Disney World would be such a wild ride? This is the story of one of the most successful transitional land sales in American history and what we can learn from it today.

In the 1960s, Walt Disney was looking for a place to build a second Disney park. Disneyland in California was a success, but Disney didn’t like the businesses that cropped up around his theme park. He wanted more control over the surrounding land for his next park.

disney world

Disney had a laundry list of requirements for the new land. Not only did it need to be plentiful and affordable, the land also needed to have pleasant weather year round so guests could enjoy the park 365 days a year. It also had to be near a major city with strong infrastructure and highways.

He looked at land in California and New York, but the properties were too small or the land was too expensive. Finally, Disney found exactly what he needed near Bay Lake in Orlando, Florida.

Florida had everything Disney was looking for in a location. The landowners at the time were happy to sell their swamp land, which they thought had little to no value. So, Disney and his associates bought the land through shell corporations with names like M. T. Lott (you can’t make this stuff up!).

The reason Disney used shell companies was that he knew the prices would skyrocket as soon as he was revealed as the buyer. If land sellers knew a millionaire wanted their land for a project that would be even bigger than Disneyland, they could set their prices as high as they wanted.

disney world castle landAs more and more land was bought under shell companies, locals became suspicious. They didn’t believe someone named M.T. Lott was actually buying up the land. Rumors swirled about who could be buying up this land. Some people believed it was NASA buying land to support the nearby Kennedy Space Center. Other names floating around were Ford, the Rockefellers, Howard Hughes, and of course, Disney.

Disney successfully bought 27,000 acres of land for cheap via his shell corporations. He might have been able to buy every single acre like that had he not slipped up in an press conference when editor Emily Bavar asked him point-blank if he was the one buying up the land. Disney was so caught off guard by the question that it was clear he was the buyer. As soon as it was revealed who was buying the land, prices shot up. Some land even skyrocketed up to $80,000 an acre!

When the Florida government found out who was buying all the land, they gave Disney the right to make decisions about zoning. This pleased Disney, who didn’t like to answer a lot of outsider questions. The Disney team transitioned the land by adding dirt to the swamp land, making it easier to build and walk on.

Today, Disney World takes up twice as much land as all of Manhattan. A sizeable amount of that is undeveloped. As per Disney’s request, around a third of the land is protected wetlands.

The Orange County Appraisers office has appraised Disney World’s property value to be over 1.3 billion dollars.

There are so many amazing lessons we can take today from this transitional land story. Here are just a few:

  • Transitional land can be extremely profitable.
  • Even land that some consider ‘low-value’ can become profitable when put to its highest and best use.
  • When selling land, it can pay off to do a little digging to find out who your client is!
  • Have a clear list of what you need out of a property.
  • The perfect land for you might not be in the first place you look.
  • Prepare yourself for tough questions ahead of time if you have to do a press conference.

Sometimes, truth really is stranger than fiction. In the case of the transitional land sale that turned into Disney World, we hope this wild story reminds you to always dream big. If you are interested in learning more about transitional land real estate transactions, check out our newly updated Transitional Land Real Estate LANDU course by checking our Upcoming Courses page.

About the Author: Laura Barker is a Marketing Assistant Intern for the REALTORS® Land Institute. She graduated from Clark University in May 2017 and has been with RLI since October 2017.

The Most (and Least) Expensive Land Real Estate in America

The price of land varies wildly across this great nation. In some areas, land real estate can cost millions of dollars per acre. In other areas, land is being given away for free. What’s truly baffling is that in many cases, the two types of land are only miles apart. What makes some land worth millions and other land worth next to nothing? Let’s take a look at the most and least expensive land real estate in America.

Most Expensive Residential Land Real: Atherton, CA

This town has the most expensive land real estate in the entire country. An empty lot in Atherton costs more than a home in San Francisco. According to curbed.com, vacant and residential land can go anywhere from $6,750,000 to $6.9 million, and that’s not even counting the price of a house. A 1.43-acre property was recently sold for a whopping $6.9 million.

A great location and a scarcity of available land are the main reasons Atherton land is so pricey. The town is located forty-five minutes south of San Francisco and less than twenty minutes away from major tech companies in Silicon Valley. Add in the fact that there is only a limited amount of land available in the area, and you’ve got properties that will continue to skyrocket in price.

Most Expensive Farmland: Rhode Island

The smallest state has the biggest prices when it comes to farmland. The U.S. Department of Ag reports that farmland in Rhode Island is priced at an average $13,8000 per acre. New England states tend to have more expensive land real estate, but why does Rhode Island have land prices almost triple some other states?

Similar to Atherton, the main draw to Rhode Island farmland is location. It is close to many big cities, which allows farmers to save thousands on transporting their produce. Thanks to this, farmers are also able to sell their produce to stores for a lower price than far-away farmers.

Least Expensive Residential Land Real Estate: Marquette, Kansas

This land goes beyond cheap. It’s free! According to the town’s official website, “The community of Marquette, Kansas, is offering free building lots to interested families who are looking for an extraordinary small town.” The only requirements are building a real home on the land and living there for at least a year. It’s like a modern-day Homestead Act.

The reason for the free land? The 2008 real estate crash stunted the town’s real estate business. No one had the resources to buy or build a new home. The town hopes the offer of free land will bring more people, businesses, and cash flow back to Kansas.

Marquette boasts a low crime rate and a low cost of living. However, the town does lack what makes Atherton and Rhode Island so desirable. The town is very remote, which can lead to problems finding a job.

Interested in applying for free land in Marquette? You can apply for land here (http://www.freelandks.com/availableland).

Least Expensive Farmland: New Mexico

You might be surprised to learn that this state has the cheapest farmland in America. New Mexico has a sunny, warm climate that would seem perfect for growing crops or raising livestock. However, it’s the desert heat and dryness that drives the prices down. The U.S. Department of Ag reports that farmland in New Mexico is priced at an average $530 per acre, a fraction of what Rhode Island farmland is priced at per acre.

The Land of Enchantment state can be perfect if you are growing foods that flourish in heat and dry weather, such as asparagus, cantaloupe, snap beans, and many spices. If your crops require lots of water, you might want to look elsewhere. The cost of irrigating some properties could be more expensive than the land itself.

Scarcity of land and location are the two most important factors when it comes to the price of land. Two properties in the same states can be priced at wildly different figures depending on how much land there is, how much demand there is, and the location of the land. To make sure you are getting the best price for the land you are selling or buying, be sure to use an expert land real estate agent.

Looking for land? Check out properties on the market from the industry’s top land real estate agents using RLI’s Land Connections property search tool.

 

About the author: Laura Barker is Marketing Assistant Intern for the REALTORS® Land Institute. She graduated from Clark University in May 2017 and has been with RLI since October 2017.

Investing in Land Real Estate for Retirement: What You Need To Know

Choosing how to save for retirement can be a decision that takes years. After all, that’s the money that you’ll be living on during your golden years. Most people stick to 401ks and stocks, but what many people don’t know is that you can invest in land real estate to save for retirement. Investing in land real estate can be a great way to save money long-term, but with any investment, you need to know what type of land to invest in, what sort of returns you can expect, and what to avoid when investing in land real estate.

There are many benefits to investing in land real estate. One benefit is that if you invest in land in different areas, you will be protected if certain properties are hit by natural disasters or the value of one type of land real estate drops. Geographic and commodity diversity can keep your money safe even in a rocky market. Another benefit is that land real estate (farmland in particular) sometimes have higher returns than stocks do. Most stocks can be expected to produce a six to seven percent return over time), while farmland has produced a steady 11.5 percent annual return over the past twenty five years.

If you are looking for a low-maintenance investment, vacant land is a great option. It is cheaper to buy than developed land, and you don’t need to spend money doing repairs or renovations. While this is an excellent investment to make in the long-term, you will have to be patient. This investment will take time to make money. You’ll also want to keep an eye on the market to make sure you’ll be able to sell it at the best possible price. Consider looking into vacant land properties in areas that are seeing an increase in population or jobs. This land will is likely to become more desirable over time, and you’ll be able to sell it at a higher price than what you bought it for originally.

When investing or buying vacant land, you should always know who you are buying from.Be careful of people who have only owned the land for a short amount of time and seem very eager to get the land off their hands. Vacant land takes times to accumulate value, so it’s suspicious if people only own it for a short amount of time. The owners might know something about the land that makes it less valuable. This is a perfect example of why it is so important to find an agent with the expertise and experience needed to conduct land real estate transactions – like an Accredited Land Consultant (ALC).

Timberland or forestland are also excellent long-term investments. The returns for timberland real estate tend to move counter cyclically to other markets.  Because of this, it will add portfolio diversification, lowering the risk of losing money. Timber is also a hearty crop that can provide you with returns for many years.

You should invest in timber or forest land only if you are planning to retire ten or more years down the road. You’ll have to spend money to plant trees and won’t get returns as they grow, but once the trees reach maturity, they will provide steady returns.

Although investing in land real estate to save for retirement is an excellent option, there are some key factors to look out for. Keep the following in mind while you look at different properties:

-You need to know the land inside out. You need to know everything about the land you are investing in. This means zoning, mineral rights, any environmental hazards on the land, usage restrictions, access easements, taxes on the property, and the likelihood of natural disasters in the area. If you think you are asking too many questions, you are not. Even small issues can end up costing you a lot in the long term. For example, you could have an incredible property with full mineral rights, but if the soil drainage is poor, the value of the land could drop so dramatically that any other positive factors wouldn’t matter at all. Finding an ALC near you can help ensure that you see the whole picture when it comes to investing in a piece of land.

-You need to be crystal clear on the taxes. This was mentioned in the previous bullet point, but it’s so important we added it again. Some properties have taxes that are so high that the taxes eat up any returns you make on the land. Speak with your land agent about this and make sure you understand what your costs will be before investing in a property.

-Are there wetlands on the property? Thanks to Waters of the US (WOTUS) and other laws, if you have wetlands on your property, huge parts of your land might not be useable. This could cause the value of your land to drop dramatically.

Investing in land real estate can be a great way to save up for retirement. Land real estate is a valuable and limited community that, historically, continually grows in value. If you do your research and spread your investments out over a few different types of land, you could have a successful start to saving and creating a well-balanced, diversified portfolio for your retirement.

About the author: Laura Barker is Marketing Assistant for the REALTORS® Land Institute. She graduated from Clark University in May 2017 and had been with RLI since October 2017.

Is December Really the Worst Month to Sell Land Real Estate?

Many people think December is the worst month for selling land real estate. There is some truth to that: families tend to want to let their kids finish the school year before moving, the holidays mean people will have less free time to tour land real estate properties, and bitter weather might keep potential clients from making the drive out to available properties. Don’t let this assumption make you think that your sales will be at an all-time low this December though. Depending on what type of land real estate you sell, this could actually be one of your best months! Let’s take a look inside the rumor of December being the worst time to sell land real estate and what it means for your business.

The idea that December is the worst month to sell land real estate originally comes from the world of residential real estate. Urban, suburban, and rural residential REALTORS® noticed a sharp drop in sales in December, especially closer to the holidays. These residential REALTORS® accredited this seasonal slowdown to a few different factors: potential clients were waiting until the New Year to make a big purchase, people didn’t want to be constantly showing their house on top of all the holiday stress, and the people that did want to buy a house in December usually had very specific needs. It’s become such a popular saying that many land agents believe it applies to their business as well.

While there are some similarities between land and residential real estate, the two fields have very different needs from their clients. Residential real estate is more focused on the client’s personal connection with the property, while land real estate tends to focus on how profitable the property can be for the client. This is a huge factor into why December can be difficult for residential real estate agents while land agents might not notice any dent in their sales. Instead of being tied to the individual needs of a client, land real estate sales are more impacted by the trends and needs of the market.

The good news for land agents is that if you have an eye on the market or have been in the business for a long time, you’ll already know what your clients want before they do. The need for timberland land rises significantly in autumn, and the sell for big game land real estate goes up as hunting season draws near.

So, is there a best and worst time to sell land real estate? While rural land real estate is less restricted by monthly ups and downs than residential real estate, there are some factors that can impact the sales. There are natural dips and rises due to what the market needs. So, while there are better and worse months for the land real estate market, the difference between them is much less severe than many people think.

If you are still conflicted about selling your land property in December, here are a few surprising benefits to consider:

Less Competition. Since many people believe that December is the worst month to sell, land real estate agents might prefer to dedicate more time to holiday festivities instead of reaching out to new clients. This means there are more potential clients and sales for you!

Making the Drive Can Make The Sale. Bad weather, snow, and ice can tempt many land agents to stay home instead of making the long, difficult drive out to properties. Being willing to drive in rough weather can lead you to a greater pool of clients. Before you hit the road, be sure your car is fitted with the proper tires for rough roads.

The Psychological Appeal of Christmas. What lowers the residential REALTOR®’s sales might actually work to your advantage. With the holidays and New Year’s Eve on their minds, people’s thoughts naturally turn towards the future and their families. People in urban areas can consider moving to the countryside to raise a family, and rural land owners might invest in more land real estate when looking at diversifying their portfolios for the New Year.

There are many factors that play into how successful a month is for selling a property. Success depends more on the needs of your clients than what month it is. If you keep up-to-date on the needs in your community and your market, December can be a great month for you.