Private landowners are subject to numerous regulations at the federal, state, county, and municipal levels. There are so many various agencies and issues that most people need a team of qualified professionals to help them with land transactions.

Last Thursday about 75 land professionals, foresters, and lenders met in Mobile, Alabama at our spring Realtors Land Institute meeting. We spent 6 hours hearing from various speakers on numerous topics about how government regulations affect everyday landowners. Today I reflected on all of that information and other regulatory hurdles I have encountered in land transactions.

Below is an incomplete grocery list, in no particular order, of various governmental regulatory bodies that could have a direct effect on you as private landowners.

• Internal Revenue Service
• Environmental Protection Agency
• Department of Natural Resources and Conservation
• Army Corps of Engineers
• Department of Transportation
• Department of Fish and Wildlife
• Department of Environmental Management (state)
• Advisory Council of Historic Preservation
• County Health Department
• County Tax Assessor, Appraiser, and Mapping Office
• US Fire Service
• Local fire departments
• Coast Guard (for river properties)
• United States Department of Agriculture
• Bureau of Land Management
• Bureau of Indian Affairs
• Board of Engineers and Licensed Surveyors (state)
• US Forest Service

Each of the 18 agencies mentioned above has their own set of regulations and rules that pertain to private landowners. Even the best land professional will not be familiar with every possible issue that could arise during a land transaction, but an experienced land agent will be aware of common things to look for.

For instance, landowners who want to build a pond on their property could need permitting from their local NRCS office, the Army of Corps of Engineers, their state Department of Environmental Management and the EPA. If you don’t know that going in, then you open yourself up to all kinds of expensive liability issues and possible fines.

Selling land has all manner of possible tax implications. An experienced land professional can generally recommend a CPA who is familiar with the sale of timberland, ranch land, or other rural properties. This CPA can help you structure a deal so that you can maximize your profits and limit your tax liability.

The point of this article is that Big Government has all sorts of implications for landowners. When participating in a land transaction you should seek the help of a competent land professional who can help you navigate the murky waters of our regulatory bodies. You will eventually need the services of a good attorney and an accountant who is knowledgeable in land transactions. Hiring competent professionals can help you avoid unnecessary regulatory road blocks.

When listing land for sale, it’s wise to invest some time and effort into choosing the right agent. Real Estate Professionals recommended that sellers interview at least 3 different agents, before signing a listing agreement. Landowners should ultimately decide on an agent that makes them feel comfortable, that will sell their property within a reasonable time frame, that will negotiate and work diligently to get the best price for their land, and will effectively guide the seller through the entire transaction.

Last month, the April Pulse asked: If you were going to list land for sale and began interviewing agents, which of the following would be the biggest determining factor in your final decision? The most popular answer to our informal online survey was “Agent Sold the Most Property in Your Area”. Coming in a very close second was the response “Agent Presented the Most Impressive Marketing Plan.”

It would be difficult as well as inadvisable to choose a listing agent based on one criterion. However, based on the results of the April Pulse, when all land agents being interviewed are offering similar marketing plans, commission rates, and the same basic services, how much property an agent has sold in his/her area would be the determining factor in their final decision.

Here’s a breakdown of the final results:

• 33.9% Agent sold the most property in your area
• 33.2% Agent presented the most impressive marketing plan
• 8.8% Agent was referred by family/friend
• 7.5% Agent whose personality/appearance you favored most
• 7.5% Agent with the most years of experience
• 4.2% Agent agreed to accept the lowest commission
• 3.9% Agent advertised prominently in your area
• 1.0% Agent agreed with you on the asking price

Congratulations to Craig Stanfield, winner of the Amazon gift card after answering the April Pulse question! Craig is a broker, auctioneer and owner of Craig A. Stanfield Real Estate & Auction Services located in Tollesboro, Kentucky.

Thank you to everyone who participated and shared the Pulse with friends and connections in the land industry.

LandThink is seeking sponsors for the June LandThink Pulse and months thereafter. Sponsorship of the Pulse is an excellent opportunity for land industry businesses and professionals to receive significant exposure by leveraging our entire network of web and social media sites. Pulse sponsorships are offered on a first come first serve basis and are subject to certain limitations. If your business would be interested in sponsoring next month’s June Pulse question, please contact us soon.

How likely are you to hire the services of a real estate agent for your next land investment? Tell us what you think! Click here to answer the May Pulse question. All respondents will be automatically entered to win a $50 Amazon gift card!

When housing crashed in the United States, forest owners and timberland investors deferred harvesting sawtimber, the logs needed to manufacture lumber. They did this to take the “long view” and side-step low sawtimber prices, waiting for stronger markets. In 2012, Forisk added a “forest supply module” to its forecasting of pine stumpage prices to estimate potential supply effects on timber prices. What have we learned? In particular, have forest supplies changed in ways that affect stumpage price recoveries at the local market level in the near-term?

Estimating Supplies

Forisk uses a measure of “removal years” – accessible inventory divided by removals – to identify local markets with potential supply imbalances. This approach builds on research and common metrics used for other natural resources. The removal year estimates how many years it would take to deplete standing inventories, given a set annual harvest level. We compare the current removal years to a benchmark specific to the local market or state over the previous 10 years. In doing this, we estimate inventory levels that account for pine grade specifications, timberland ownership and forest accessibility associated with steep slopes and hydric (wet) sites.

For nine of the eleven states studied by Forisk in the U.S. South, average removal years range from 14 to 24. In other words, at the state level, a typical “forestry” state has 14 to 24 years of standing pine grade inventories during normal times. Today, for 2013, all eleven states have at least five years more of inventory relative to historic averages. However, strengthening markets and increasing wood demand have already started to put a dent in excess inventories. In forecasting wood demand through 2023, Forisk estimates that up to six of the 11 states move back into normal inventory ranges by the end of 2014.

Timber Price Implications

Today, the theory that pine grade accumulated, possibly to excess, on the stump in the U.S. South is holding water. Historical research and quantitative relationships reinforced the notion that (1) stumpage prices would lag increased demand and pricing for softwood lumber and (2) excess forest inventories could further dampen pine sawtimber price recovery.

Quantitative evidence confirms that pine grade stumpage prices lagged increases in softwood lumber prices. And the slow recovery of pine grade prices in 2012 showed greater dampening than estimated by the Forisk Forecast. South-wide, actual 2012 pine sawtimber prices in the South were 1.6% lower than Forisk’s estimate. At the state level, pine sawtimber prices were, on average, $0.21 per ton lower than forecasted by Forisk. While we cannot claim or confirm causality – we cannot prove that oversupplies produced slower growth in pine grade prices –we can establish the relative consistency in the story of demand-versus-supply across states.

Timber prices in states with the most severe pine grade “oversupplies” appeared less sensitive to increases in wood demand. This includes states, for example, such as Georgia and Mississippi. While these estimates do not specify the situation in any given wood basket or for any given timberland property, they do support the evidence that supplies have affected stumpage markets selectively.

Every time I meet someone new the question eventually arises “What do you do for a living?” People seem to understand the Real Estate sales portion of my job well enough. They are familiar with Realtors in general because of personal experiences when purchasing a home, various reality TV shows, and the list goes on and on. When I get to the part about being a consulting forester, more often than not, they seem to have very little, if any idea of what that means. “So you work for the state?” By this point I can see that I have lost them as they picture me in a tower looking for fires, cutting down trees, or just walking around hunting all day. In reality, a consulting forester is not all that different from a Realtor.

In the state of Alabama, people that represent themselves as professional foresters are required to be Registered (licensed) by a state board. Registration requires a 4-year degree (in forestry), two years of job experience (in forestry), a trip to Montgomery to take a lengthy test that focuses on general knowledge and ethics, and a small fee of course. We have an annual continuing education requirement of 10 hours in order to maintain our eligibility for Registration. These are not unlike the steps to earning and maintaining a real estate salesperson’s license. We also have a fiduciary responsibility to our clients. A consulting forester uses his knowledge of science, ecology, operations, chemicals, contractors, local markets etc. in order to help landowners achieve their goals and objectives for their property.

One of the main functions consulting foresters perform is selling timber. I don’t think that I have personally sold a timber sale yet where the difference in the lowest and highest bids was not more than enough to cover the commission. The landowner also receives the benefit of having a third party monitor the progress of the sale, keep up with settlement payments to ensure proper payment has been made for the timber cut, prevent destructive logging practices, and ensure that any excessive damage is satisfactorily repaired. When the sale is complete, we also arrange and monitor site preparation and reforestation activities if the landowner so desires. Outside of timber harvesting, the number of services consulting foresters perform is only limited by the imagination. We have some clients with larger land portfolios for whom we handle everything from harvest planning, stand treatments (burns, releases, etc.), property taxes, hunting leases, and even record keeping. We also have some clients with smaller parcels of land that we may only work with once or twice to sell some land or timber, appraise a stand of timber, or help control invasive species. The average landowner will not need the services of a consulting forester on a continuous basis; however, it is still a good idea to have a working relationship with one because you never know when a situation may arise where even seasoned landowners may need some help.

The purpose of this article is to offer a little advice to the average landowner, whether they are buying their first tract of land or their 10th, about the benefits and services consulting foresters can provide. In the future I would like to look more closely at some of the challenges a landowner will face over time such as how to make sure you are working with the right people, the importance of timing with management activities and timber harvests, property maintenance, reforestation, and anything else I can come up with that may be “article worthy”.

While attending the Global Agribusiness Summit at Millikin University in Illinois Brett Begemann, President and Chief Commercial Officer of Monsanto stated that “If” was not an acceptable option in describing the challenge of feeding an additional 2 billion people worldwide by 2050. In an article written by Tom Doran of AGRINEWS, he reported Mr. Begemann suggested the potential global food demand creates a significant opportunity for the agricultural industry to step up innovation and efficiency to support a sustainable path for agricultural producers and consumers. It is clear that this opportunity is real based on the array of world organizations predicting that by 2050 there will be an additional 2 billion people to feed worldwide. It is estimated the world population will increase by 47% to 8.9 billion by 2050, and the impact of this growth will push the agricultural industry to double its production in the next 30 years to meet this demand. This fact coupled with the evolution of dietary preferences along with growing income in countries like China provides much evidence to support an increased need for food in the world.

This is an exciting time to be in agriculture, and now more than ever farmers are going to be asked to toe the line and meet the challenges of greater production. As a land broker specializing in agricultural properties this proves to be an exciting time for my industry as well. A limiting factor to any farmer today is finding land on which to produce their product and I am working each day to find ways to bring active buyers in the market together with sellers interested in trading agricultural land. On the Delmarva Peninsula, agriculture seems to be taking a front seat for land use and agricultural producers and actors in the market are taking positions to capitalize on this need.

In the last month alone, clients have reported to me the construction of new grain facilities and the formation of interesting agricultural investment strategies that are focused on aggregating land for production and maximizing outputs by maintaining fixed up front costs for agricultural inputs. Strategies for maximizing agricultural returns have been mastered by large agricultural investment groups like Westchester. I had the good fortune recently to hear Randall Pope, President and Chief Executive Officer of Westchester speak, and he described the model his investment group has used to bring consistent returns to investors through production agriculture. In 2010, TIAA-CREF acquired a majority interest in Westchester and today the company manages over $2-billion of assets in a management portfolio which includes over 400 “high quality diverse farmland assets across the United States, Australia, South America and Europe”, as reported under their company profile. Westchester has proven that investing in agricultural production can bring a consistent return on investment and they serve as a model of success in establishing strong investment standards for the industry.

This is a unique time for the agricultural industry as technology continues to shape the efficiencies in the industry for producers and the foundations of demand for agricultural commodities remain strong. Leveraging global food demand and production, agriculture can be a sound strategy going forward for investors seeking consistent returns in a limited risk asset class.

I see a strong partnership between the farmer today looking to increase production as he installs a new center pivot on the farm, and the investor seeking consistent returns based on well documented market forces driving the agricultural market place. Clearly there is much to accomplish in the next 30 years and one of the largest hurdles a farmer has to jump is the capital cost of land acquisition to maintain or grow their operation. In Mr. Beggeman’s speech he suggested that we must be innovative and work together to meet this challenge, and from this I welcome the idea to bring investment to production agriculture on the Delmarva Peninsula. The synergies between the agricultural and financial sector are significant, and if we can work together to build strategies to bring investment to agriculture while working to provide food and improved quality of life around the world in the coming decades, the outcome will be immeasurable.

Part II of the Land Evaluation Series

Bank Owned Properties and Distressed Sales

Spoiler Alert! Since 2007 the Florida real estate market has declined sharply. There is not a single segment of the real estate industry that has remained unaffected by the recession. Real estate values across the board were hyper inflated; based upon speculation, unreasonable return expectations and subprime loans which were mandated by our government. The height of the market was unsustainable and destined to fail. The past 6 years have been a direct reflection of a massive market correction.

One of the most challenging aspects of the current land market is assisting sellers in understanding the actual and realistic value of their land, not what they think or believe it is worth. Many distressed owners have unrealistic, preconceived pricing expectations based upon the hyper inflated past. Too often I hear something along the following: “Well, in 2006 I was offered {enter some insane amount} for my property. I won’t take less than {enter insane amount}”. The ironic and most frustrating part of this is that these owners HAVE to sell their properties, or face financial ruin and eventual loss of their asset. Simply put, if distressed sellers do not sell their property, they will face the harsh reality of losing everything (foreclosure).

Shift, a real estate book written by Gary Keller, explains the concept well. Keller explains that the real estate market, across the board, has essentially entered into a paradigm shift. Things are not what they used to be. In fact, they are 180 degrees different. For the most part, values have returned to realistic and affordable levels. Those who fully understand this new reality are successful in the current market. Those who do not understand this reality face an uphill battle.

Distressed Sellers Mostly Fit Into Two Categories:

1. The Unrealistic Distressed Seller – The unrealistic distressed seller believes their property is worth {enter insane amount}. The foreclosure process starts. They do not sell their property in the time available. Many times these land owners fight the foreclosure process. Many times I ask them, on what grounds? You borrowed the money didn’t you? Have you returned it? The foreclosure process comes to fruition, and they often lose everything. Many times, these sellers receive offers on their properties during their foreclosure process that would allow them to be free and clear of their mortgage and personal guarantees, and many times these offers would allow for extra cash left over to be paid to seller. Unfortunately, I have witnessed stubborn and unrealistic sellers take their properties to the end of the rope; not take advantage of their opportunities, lose it all and be on the hook for a deficiency judgment.
2. The Realistic Distressed Seller – The realistic distressed seller recognizes and understands their situation. They also understand the current market. The realistic distressed sellers are very aggressive with their pricing strategy and open to all offers. They move decisively and quickly towards a solution. These sellers typically move their property quickly. They understand that they are competing against other sellers and other properties. When they price their property competitively, they are successful in making a sale.

Where is the silver lining in all of this? My economics teacher used to tell our class “A bad event economically for one person can be a great event economically for another.” Buyers and investors who have capital to invest can benefit from this market.

Every transaction isn’t “a deal of a lifetime”, but over the past few years there has been tremendous opportunity to purchase properties at distressed prices. Buyers have to be in the right place, at the right time. There are “good deals”, and then there are “steals”. Most distressed land sales fall into one of those two categories. They are typically all good, but it just depends on how good. Investors in this market always believe they will get their “steal”. Often times they end up passing up “good deals” because of their obsession with a “steal of a deal”. Because of their indecisiveness and inaction, buyers and investors ultimately end up passing on and losing good opportunities.

An example of a land deal that was considered a steal was brokered by Daryl Carter of Maury L. Carter & Associates, Inc. in the summer of 2011. Daryl Carter represented a bank in the sale of 1,395+/- acres located in Lake County, FL just minutes from the back side of Disney. The property is in the immediate path of progress for the next wave of logical development. This ideal site sold for $4.5 million or $3,225/acre. At the height of the Market, the land previously sold for $32,000,000 or $22,939/acre. The investors in this land paid agriculture prices for “Grade A+” property. Does this mean that all of the large acreage property in this area is worth $3,225/acre? Absolutely not. The point is that certain circumstances in the real estate world have provided for outstanding opportunities. In fact, the Wall Street Journal picked up the story. The following is an excerpt from the article.

Often, owners in default abandon their properties seemingly overnight. Typically, banks are not equipped to deal with the foreclosed properties as this is not their core competency. This leaves the land (or other asset class) neglected and vulnerable to further deterioration. Many times, there are specific reasons these properties can be purchased at such low prices. Nearly every bank owned property I have worked on has had some sort of environmental issues (severe to minimal), regulatory issue (land use, zoning, permitting), legal issue, access problem, cloud on the title that need to be vacated or trespassers. Buyers often make the decision to purchase the property with full knowledge of these problems. Typically, these issues can be mitigated. Banks do not want to deal with such issues themselves as they are expensive, time consuming and distractions from normal bank work. Because of these issues, there is often opportunity for investment at a heavily discounted rate.

The first wave of bank owned deals has come and gone. However, it is believed that there will be another round of properties entering the market as bank owned assets or distressed properties. Many loans created during the boom years had five or ten year balloon payments. Due to the real estate crash of 2007, many of these owners need massive amounts of capital right now to pay down their debts. In the present capital constrained market, often times the funds are not available to current owners. This second wave of distressed and bank owned properties might not be as large as the first, but it will provide for opportunities for investors in today’s challenging real estate market.

The renowned acting teacher Stella Adler taught her students – including Robert De Niro and Warren Beatty – to focus on specific “real” things that you know to be true. While onstage, actors should concentrate on the smallest elements. The glass on the table…is that a crack? Your partner’s blouse…is that a spot? Focus on small truths and build up. Failure occurs when the actor attempts to digest large parts in single lines and sweeping gestures. And so it goes with forecasting timber prices.

Framing the Outlook

The 2013 Forisk Forecast frames the ten year outlook around four key themes each built on small elements and observable truths:

• Timber price performance:  how did timber markets perform in 2012 relative to Forisk’s expectations for 2012? A detailed self-assessment provides a necessary testing of key assumptions.
• Capital investment:  where have forest industry firms decided to allocate capital for 2013 and moving forward? Since timber forecasts are applied locally, capital flows reinforce which states will have the “iron in the ground” to satisfy growing demand.
• Forest supplies: what have we learned about the relative supplies of pine grade and pulpwood and their actual or perceived impacts on stumpage markets? In the past two years, we observed an eroding of the price-to-demand response in states that corresponded with excess pine grade inventories.
• Demographics: how do current demographic trends in the U.S. compare to our historic understanding of how population changes relative to wood demand and housing? At the end of the day, we must confirm the expectation of fundamental demand for wood products.

In this article, I will focus on the performance of Forisk’s 2012 price forecast and on summary expectations for 2013 through the next ten years.

2012 versus Actuals

For pine stumpage prices in the U.S. South for 2012, the Forisk Forecast was within 2% regionally across all products. Analyses of eleven state-by-state forecasts shows that Forisk was, on average, $0.21 per ton lower than the actual pine sawtimber prices and $0.33 per ton higher than the actual pine chip-n-saw prices. For pine pulpwood, Forisk’s estimates for eleven state-level prices for 2012 had, on average, $0.00 per ton difference from the actuals, with seven states realizing slightly higher prices than forecasted by Forisk and four states realizing lower prices than forecasted by Forisk.

For delivered softwood prices in the Pacific Northwest, the Forisk Forecast was within 1% for three out of four state-product forecasts for 2012, and within 2% for the fourth state-product. Across categories in Oregon and Washington, Forisk underestimated the actuals for 2012 by, on average, $4.41 per MBF or 0.8%.

Expectations for Timber Prices in 2013

What can we expect from softwood timber prices moving forward?  South-wide pine sawtimber prices are forecasted to increase 7% in 2013 and 34% by 2023. Results vary significantly across states. Alabama, Florida and Louisiana lead Southern states beyond the $30 per ton benchmark in 2014 and 2015 based on state-wide pricing.

In the Pacific Northwest, the “Base Case” for delivered Douglas-fir #2 domestic sawlogs are forecasted to increase 3% in 2013. For Coastal Oregon, prices increase 23% by 2023. For Washington, prices increase 20% through 2023. Oregon average annual prices maintain a $41/MBF spread over Washington during this timeframe.

LandThink subscribers, fans, followers and land industry professionals across the country voiced their opinion on what features of a master planned community would influence their purchasing decision the most. Here’s a breakdown of the final results:

41.0% said Location of Community
20.0% said Homesite Views (waterfront, mountain, golf, wooded)
17.4% said Price
12.5% said Amenities (golf, pools, nature trails, tennis courts, horseback riding)
9.1% said Size of Homesite

LandThink.com has asked for participation in a series of questions, the LandThink Pulse. Each month, we ask one, straightforward question, in an effort to gather interesting insight into the current land real estate market. Thank you to everyone who participated and shared the Pulse with friends and connections in the land industry. Since it debuted last May, interest and participation in the Pulse has grown exponentially each month.

LandThink.com would like to extend a huge thank you to SouthStar Communities for sponsoring the March Pulse. We are pleased to have SouthStar Communities as a longtime LANDFLIP.com Professional Account subscriber and banner advertiser.

Congratulations to Forrest Meadows, the winner of the $100 Amazon gift card after answering the March Pulse question! Forrest is broker and owner of Forrest Meadows Homes & Land located in Montgomery, Alabama.

LandThink is seeking sponsors for the May LandThink Pulse and months thereafter. Sponsorship of the Pulse is an excellent opportunity for land industry businesses and professionals to receive significant exposure by leveraging our entire network of web and social media sites. Pulse sponsorships are offered on a first come first serve basis and are subject to certain limitations. If your business would be interested in sponsoring next month’s May Pulse question, please contact us soon.

How you would choose an agent if you were going to list land for sale? Tell us what you think- click here to answer the April Pulse question. All respondents will be automatically entered to win a $100 Amazon gift card!

When a seller decides on a course for marketing a property and decides to invest time, money, and effort into that decision, they are buying a product- an economic good that they find valuable. Likewise, when a seller hires an agent they are buying a product. Now granted they pay for the marketing and expertise that it takes to get the job done, but they are buying a path to a closed sale. Sellers don’t necessarily want marketing; they want the work to culminate in a closed sale, effectively produced.

We all have fancy ways of selling our marketing and I do my best to let sellers know about all of the different marketing avenues in which we invest. These things are the tools of our trade. However, at the end of the day, the seller wants a sold property. It doesn’t matter if the marketers have it in every magazine, 984 websites, and a flyer in every service station in town. A seller needs a buyer, and wants the marketing to bring the buyer to him, resulting in a closed sale.

Too many people lose sight of that of that fact. I’ve had sellers become disgruntled with me because we sold something too quickly… or even want to reduce my commission because I did my job too effectively.They lost sight of what they bought, by being all caught up in what they paid for. The business of how a buyer is procured should be left up to those doing the marketing, and to those who know how to do it effectively. Likewise, too many agents lose sight of the job they are hired to do. Agents are hired to sell the property. Agents are not hired to put up signs, hold open houses, video and put it on 984 websites. Real estate marketers are hired to do none of those things which are so essential to their business. None of these marketing strategies can stand alone and ultimately make a seller happy.

Effective marketing is knowing how to take all of those different aspects and put them together to accomplish a closed sale. Effective marketing is knowing which of the components to use, when to use them and where to use them to accomplish a closed sale. Effective marketing is the course of events that produces a closed sale. Effective marketing can be an agent simply making a single phone call to a potential buyer, resulting in a closed sale. Effective marketing may be exposing the property to the widest array of potential buyers in order to procure the one buyer that is needed to produce a closed sale. Effective marketing is that which accomplishes the goal of the seller. A closed sale produced effectively.

A Rush to Hard Assets

Fiscal Cliffs, economic instability, over regulation, taxmageddon, hyperinflation, trillions of dollars in unsustainable debt, high unemployment rates, debt ceilings, total economic meltdown, and the list goes on. Sound familiar? It should. Often these headlines are ignored as they play on our fears and anxieties. Unfortunately, these are harsh realities that pose a very real threat to the financial well-being of many Americans.

With so much uncertainty in our current economic environment, investors are searching for and planning on making their “safe investment”; mainly as a hedge against inflation. Investors have many options on where to place capital. Capital can be invested in stocks, bonds, gold, silver, precious metals, new business ventures, energy, or other areas of investment.

With so much instability in the financial world, a rush to hard assets has prevailed. These hard assets provide stability and protection, some offer more stability than others, however, there is one asset that is still a very good bet: Land.

Why Land?

Land is tangible. Land can be used. You can walk on it. You can see it. You can touch it. You can feel it. It will never go away. Its overall net worth will never be zero (some assets can lose, and have lost ALL of their value).

The following three land categories of real estate have been and will continue to be popular among investors looking for a hedge against inflation. Each of the following categories can stand alone, or relate to the other.

1. Agriculture, Recreational, and Self-Sustaining Land
2. Bank Owned and Distressed Sales
3. Land Banking/Long Term Investment Holds

These categories will be discussed and reviewed in this three part series.

Agriculture, Recreational and Self-Sustaining Properties

1) Agriculture

Ag is back!

Humans are always going to need three basics items to insure their own survival; food, water and shelter. These are the most basic of needs (Maslow’s Hierarchy of Needs).

Over the past few decades, there has been an enormous population growth in Developing and 3rd World Nations across the globe. This massive population growth is expected to continue over the next 50 years as there are no signs indicating it will slow down. We have been, and are currently in the midst of a global food crisis.

There are too many people, and there is not enough food. Experts predict that the global population will reach approximately 9.8 Billion by 2050. Therefore, the need for agriculture based land breaks down to a simple supply and demand function. More mouths to feed means more food needs to be produced. If more food needs to be produced, this means there is a higher demand for the land that produces these items.

As another part of the equation, countries like China, India and Brazil have exploded in population. Similarly, many of these countries’ economies have begun to grow exponentially. As these economies have grown, so have their middle classes. For the first time, many of the members of these emerging middle classes are experiencing the luxury of having disposable income. With disposable income, large portions of populations are moving from basic staple diets of rice, beans and other basic food items, and they are expanding their palates to include a wider variety of food items. Those items include protein based products (beef, chicken, pork), as well as other commodities including blueberries, citrus, fruits, vegetables, and an assortment of other non-basic food items.

As global and domestic populations have increased, so has the education on food products. Consumers are more selective on what they choose to eat. More consumers have turned to healthier food products as alternatives to processed goods; thus creating a larger market for organic products, or low input fruits, vegetables, and specialty meats. Some countries have extremely low agriculture standards and regulations. Consumers want to have confidence in their food safety. The U.S. has extremely high standards and regulations that go “above and beyond” many other countries’ food safety standards and regulations. Because of this, there is an emerging trend that indicates a move towards “buying local” or domestic products, even if it cost a little extra.

It is predicted that agriculture will continue to enjoy stable and growing markets. Florida typically does not produce staple crops like corn, soy beans, cotton and peanuts (excluding some parts of the state, mostly North Florida). Each specific agriculture industry has its specific challenges (disease, weather, economies). If managed correctly, and if expectations are realistic, agriculture and agriculture land can be a very safe long term investment. Like most real estate investments, the land will appreciate with time, and depending on the crop; farmers, timber growers, ranchers and others can cash flow their operations. What is the common denominator in producing all of these products? Land.

Dominate Types of Agriculture Based Land in Florida:

• Citrus Land
• Ranch Land
• Row Crop Land (lettuce, vegetables, melons, strawberries, blueberries, blackberries, fruits, etc…)
• Pine Plantations or Timber Tracts
• Sugar Cane Fields
• Sod Land
• Alternative crops; many farmers are beginning to experiment with alternative crops. Those include olives, pomegranates, renewable energy crops, peaches, and more…

Through time, agriculture lands have proven to be a great investment. In the current market, land prices for this type of real estate are reasonable. As a plus, in the State of Florida, taxes on agriculture land is extremely low because of our Greenbelt tax exemption laws. Investors turn to agriculture land to hedge against inflation and protect themselves against volatility of market changes. Over time, land can outperform many alternative investment opportunities.

2) Recreational and Self-Sustaining Properties

In my recent experience, two of the most sought after property types are for Recreational and Self Sustaining Properties. Recreational and Self-Sustaining Properties typically have the same characteristics of one another.

Recreational properties provide hunting, fishing, four wheeling, dirt biking, horse/equestrian activities, hiking, retirement living, canoeing, boating, other water activities, hobby farming, gentlemen estates, weekend retreats (for R&R), family enjoyment, etc…. This type of property allows owners to exercise their right of private enjoyment. Many buyers are using their life savings to purchase these types of properties. It is a way for them to fully enjoy their investment, rather than having their wealth tied up in intangible, unusable investments.

Many buyers, believe it or not, have asked me to assist them in finding properties that would be of great use and value “should things get really bad”. Often we shy away from such notions and principles of “doomsday prepping” as ludicrous, unreasonable or even taboo. However, I assure you that the buyers searching for such properties are very competent and respectable members of society. Many of these buyers are doctors, lawyers, bankers and wealthy businessmen and women. These buyers want a property they can retreat to should an emergency situation arise. Many of these buyers liken their purchase of self-sustaining properties to buying insurance.

Mostly, these buyers are looking for the ideal combination of both recreational and self-sustaining living options.

Characteristics of such properties include:

1. The ability to produce their own food and to have a potable water source
2. Seclusion
3. Housing or livable area options
4. Water feature; lake, creek, river, pond, canal

Currently, there are many properties on the market that fit the criteria for both recreational and self-sustaining lands. In the current market, there are some incredible opportunities for purchasing the land types which are discussed above. Many buyers, through patience and time have found properties that fit both the recreation and self-sustenance criteria. As with farm land, this property type is usable in many forms. Properties of this nature tend to have long term appreciation value and typically perform well as a hedge against inflation.