Only one factor determines a winner in football—which team scores the most points. One analyst summed up his insight into a game between two low-scoring NFL teams: “Points are going to count in this one.” Can’t quarrel with that. This commentator appears to be paid real dollars for his wisdom.

I’m not sure how the Harvard Business School would analyze land investing, but what I’ve seen over 40 years is that there is one factor that almost always determines the degree of success or failure: the buyer’s get-in price.

The longer land is held, the more likely it is that it will appreciate. But the net profit after all the carrying costs are counted in may not be as much as you might expect.

It is, of course, easy to offer advice like, “Don’t buy at the top of the market cycle.” (Which, by the way, is excellent advice.) Unfortunately, no one knows where the top is until it appears in the rear-view mirror. And the normal tendency for buyers in an up market is to assume that “up” will continue, so it’s hard not to buy high when higher appears to be the future. We are all subject to buying high in order not to be left out.

While I, too, believe that over the long term land prices must trend up owing to population growth, I also believe that within that long-term trend, dips will occur and some will take several years to shake out.

It’s also likely that certain types of land will lose a portion of their economic utility as technology changes. Coal properties, for example, will lose value if federal policy starts to back out coal as a utility steam fuel. Certain types of timberland could be devalued by a market shift away from particular finished products, such as newsprint. While new uses could create demand for those timber resources, a significant time lag could occur. Good-quality crop land may be overvalued owing to recent ethanol demand, but over time I think it should continue to be an inflation hedge because other crops can be grown on it if corn demand declines as a result of lower ethanol demand or a shift away from corn products in food.

Different types of land follow different valuation trends, because they are driven by their own markets. The fact that prime farmland has been appreciating doesn’t mean that marginal farmland will too, or that Maine timberland will go up. A land investor has to know how a particular property fits in its particular market.

This means he has to keep one eye on national (and even international trends), another eye on trends within the industry that affects the type of land he’s evaluating and, finally, a third eye on local factors, such as markets for the land’s products, zoning, neighbors and future developments that affect the parcel’s value, both negatively and positively. Land investments are affected by the most macro of factors as well as those factors that are entirely local and property-specific.

And when all is said and done, a low get-in price is the factor that both protects an investor against adverse trends and assures profitability.

The get-in price must be judged against the intrinsic value of the property’s immediate and long-term assets, not whether a sale price matches recent selling prices of comparable properties. When the get-in price is lower than the intrinsic asset valuation by at least 25 percent, the property is likely to be a good candidate for investment, other things being equal.

I’ve noticed a number of properties cutting their asking prices by 20 percent during the last month or two. This is a necessary market corrective, and buyers should be paying attention to this trend.

Get-in price to a land investor is not the final score, but it usually determines the degree of win or loss.

1. What are your goals in buying a property? Investment, income, recreation, hunting, peace of mind, or all that and more? This is the first question you should answer when you begin the process of looking for a property.

2. The next step is to find out what type of properties that are available and meet those goals.

3. Then you should figure out your budget and how you will fund your purchase. These two things must be done together. Both will vary some, based on the other. For more information on how to pay for your investment see this post, “Land Purchase Funding Options.”

4. Once you have these taken care of, you need to figure out where you would like this investment to be. This area can be very limited or very open. I would suggest leaning toward a more limited scope though. Too broad of a base will lead you to feeling a bit overwhelmed and under prepared.

5. Next you should visit the area. Spend a weekend in the part of the world you have selected and see if you like the area and if it meets your goals.

6. Now its finally time to start screening properties. The first thing I suggest is searching the Internet. Many of you are already at this point. Please, may I humbly ask you to go back, and complete steps 1-5 before going on. You may find it helpful to write down your findings from each of these steps. There are many search sites out there. Look around. This is very important to educating you about the current market in your chosen area.

7. Once you have done all of this, contact an agent. Find one that specializes in land transactions. Let the agent know what properties are of interest to you and why. Let him know the answers to the questions in the first 5 steps. A good agent can serve you best if he has a complete knowledge of your goals, budget, funding, needs, likes, and dislikes.

8. In step six, you should have prepared a list of many, many properties. Once you have made this list and given me the information in step 7, your agent can help you screen out some properties and screen in others.

9. Then schedule a time for first meeting with the agent. This is a time for you to look at potential properties and to get to know your agent. Looking at a few properties with you will help calibrate your agent as to what you like and dislike. It may change your mind about some things as well.

10. It may take several meetings to find a few potential candidates. Once you have looked at properties that you really like, narrow the list to two or three that meet your needs best. Please keep in mind that there is no “perfect” property. All properties have issues and the likelihood of you finding everything you want, exactly the way you want it, is very slim. Find those that fit the mold best.

11. Then look carefully at these properties. Spend time investigating these properties. Get a feel for what the property is and what it is about. Don’t forget to look around the area surrounding the property. Compare the property to the goals you set out in the first step. If it fits these goals, the location is right, and it is within your budget, then it is time to compare it to the others on your shortlist.

12. Rank the properties in order of your preference. Then figure out what each property is worth to you…regardless of the market, regardless of the listing price. Each property will have a personal value to you. A value that is consistent with how you will use the property. This might be more or less than the listing price. I would suggest that you go after those that you value more than the listing price, or at least the ones that are as close as possible.

13. Now is the time to really turn the top candidate inside out. Make doubly sure it is the best fit for you. Make sure there are no issues that you cannot live with. Ask any questions that you have left at this point. Understand the property. This is where you do most of your due-diligence. (making sure the property is suitable and what it appears to be)

14. Now you are ready to make an offer. Do this in writing in the form of an offer to purchase. The seller will take an offer more seriously if it is a written one. I cannot tell you what to offer. I can tell you that most buyers do not offer their top-dollar right off the bat. Most buyers expect a counteroffer from the seller. You should expect one too. Don’t let the offer process get to you emotionally. This is a business transaction and should be treated as such. The buyer and seller are both out to get the best deal for themselves. You should not blame a seller for trying to sell a property for everything that he can get out of it. That does not mean that you must meet the seller’s price though. Remember that not all negotiating is on price. There are many conditions, terms, and other things that can come into play. Do not overuse these things, but protect yourself as best you can as well. Your agent should give you some guidance here.

15. If you have an offer and acceptance, move on to step 16. If not, continue the offer process until you have reached an agreement or ruled the property out. You should not offer more than the property is worth to you, or you can justify logically. If you rule the property out in the offer process, go back to your list and start at step 13 with the 2nd property on your list.

16. Contract! Once you have an offer and acceptance you will have a written, binding agreement to purchase the property, as long as the terms and conditions outlined in the contract are met. Now you should begin doing anything that the contract requires you to do. Getting financing, a closing attorney, inspections, whatever the contract calls for. Again, a good agent will help you in this process.

17. Once all of the terms and conditions have been satisfied and you are ready to fund the transaction, it is time to close on the property. Your agent will work with you, the closing agent, the seller and anyone else to schedule a time or course of action to get the closing completed. We complete many transactions via overnight delivery services, fax, and email today.

18. Close on the property. Get the keys, transfer utilities, make sure you are properly insured. Find out how the property taxes are handled and make sure you have a good understanding of that process.

19. Enjoy your new land investment!

Again, this is a logical process to proceed through when buying a property. Many people are overwhelmed by the process but it need not be something that people fear or dread. Taken one step at a time, you will find the property that is right for you, at the right price for you. There are many of these steps that I will need to be there to help guide you through. No worries!…An agent who is experienced and specializes in land transactions has been there, done that! You should know, however, that every transaction is different. I learn new things every time. 10+ years of experience has taught me many of the pitfalls to avoid, and the easiest ways to get from the beginning of the process to your owning a piece of rural property.

Types of Land:
Land has many purposes. As a provider of food, you have agriculture land. For wood products, you have forest land. Mining land provides minerals and metals. Parks and Land Preserves provide habitat for all living things. Recreational land provides for human pleasures and exploration. Ranch and pasture land provides grazing for animals. Rural land provide for less dense living. Urban land supports commercial, home, and limited recreational usage.

Land as an investment:
There are many types of land investments. In fact, all land acquisitions are investments whether held for a short time or extended periods or even generations. Every real estate investment always starts with land whether you were involved with the land or are now involved with the bricks. ALL structures have a foundation on land.

Land is constantly increasing in value driven by the ever increasing world population. Population growth creates a constant demand for new development, more agriculture products, more timber, steal, oil, minerals, etc. But land that has the most demand is development land for homes, businesses, schools, recreation, and other population demands.

Learning how to identify these areas can be obtained by observation, inquiries, and knowledge of future growth patterns. Land development creates trends and trends can be followed. For example: new industry creates retail which creates housing. Watching where new industrial sites are being planned may help identify such land that may have future potential. Investing in land outside an urban area where new highways, infrastructure, and annexation, are planned could be an indicator of potentially higher land prices in the future. W.C Fields said: “If you know where the people are going, get there before they do”. The earlier you invest into land, the more you will be rewarded at a later time. Building good strategies and a little risk can be very rewarding. Do not forget your Land Pro contact. They will help make your investment decisions easier.

Land vs. Residential investments:
Buying an investment home can have a lot of strings attached. Rehabbing and workmanship issues, termites, radon gas, lead based paint, etc. (Now rented, tenants issues like fix this, sorry I am late on my rent and then try and get them out and hope they did not destroy the place.) What happens when the economy takes a severe downturn and you are unable to rent the property? Those mortgage payments are still due.

Land has no tenants, no maintenance, no complaints, only the pleasure of walking upon it and watching it grow in value. Waiting for that anticipated phone call when a developer says, “I want to buy your land!”

Land stabilizes in value during downturns in the economy. Residential development increases when interest rates decrease. Land also enjoys increases in value during an upward trend in the market, but when the market declines in real value and home values decline, land stabilizes. Land is driven not by economic pressures, but by population growth. The ever increasing population keeps constant pressure on the need for more developable land. When the interest rates decline, the gates are open for more development and the pent up supply of land is now in higher demand.

Financing Land:
Money lending is a calculated risk. Home mortgages have lower interest rates due to the fact that the lending industry feels if you have a home mortgage, you will probably get up everyday, go to work and make your mortgage payment on time; probably because you sleep there.

Vacant land loans carry more risk. The assumption is that you do not sleep there and will make your home mortgage before you would make your land mortgage if you were positioned to make a choice. Therefore, you will usually see about a 2% higher interest for a land loan as opposed to a traditional 30 year fixed mortgage.

Farm Credit, “The Land Bank” down payment requirements for land are 15% down, and will usually only extend no more that a 20 year term mortgage. Other lending sources may require more down payment and have shorter terms.

Any real estate that has five or more acres is considered “non-conforming” in the mortgage industry nationwide. The mortgage industry prefers bricks and less land. Depending on your goals, you can tie up a lot of assets with little cash. Consider investing money in Wall Street and you call up your broker and say, “I would like to buy $100,000.00 in stock and will pay 15% down.” If you have short range goals, you may want to fully leverage your land purchase. If you have further long range goals, you may want to pay cash or finance less. “Time value of money” will make that decision clearer.

“Highest & Best” Use of Land:
What you see is not necessarily what you get. A simple example is you purchase 10 acres of land for $50,000.00. This bounty has lots of state road frontage and lays well. The county “Sub-Division” laws say you may subdivide land into one acre tracts or 43,560 square feet lots. The average lot in this market is selling for $15,000.00 per one acre lot. Is the investment worth $50,000.00 or $150,000.00?

Learning how to recognize the potential of a tract of land is very important. Reviewing and understanding the “Sub-division laws” a must read. Knowing how to play the game starts with that affidavit.

The Out Strategy for Land:
Land is as liquid as any other type of real estate despite what the critiques say. Entering into a land investment should not be callus. If you plan to purchase ten rental properties or light commercial warehouse space, you probably spend a lot of time analyzing that investment. Land is no different. Good initial planning for the use of the land, observing the market trends, holding ability and “Highest & Best” use plan will strengthen your position.

Using the example above, a bail out strategy may be selling off two lots now at a lower anticipated price and maintaining the balance of the inventory until the market turns. Auctions which are a quick, usually 30 day close, may be one approach. Subordination can be another way to speed up your return. The initial research and planning are as important in land investments as they are with any other type of real estate investment.

Gloria had asked me to share my research with our RLI members and with great pleasure I will comply. Today when I was composing my response to her I realized how important this assignment was.

For fifteen years and I have been in the Land Brokerage business, and offend wondered why there has not been more attention paid to Land. I guess that because it is so common to us all that we just pass it by, not realizing that Land is what feeds us, cloths us, houses us and provides all the resources of life.

In my research, I ran across an anonymous statement years ago entitled “Who Am I?” that spoke to my heart and expanded my understanding and appreciation for Land.

Anonymous: Who Am I?

I am the basis of all wealth, the heritage of the wise, the thrifty and prudent.

I am the poor person’s joy and comfort, the rich person’s prize, the right hand of capital, the silent partner of thousands of successful people.

I am solace of the widow, the comfort of old age, the cornerstone of security against misfortune and want. I am handed down through generations, as a possession of great value.

I am the choicest fruit of labor, the safest collateral and yet I am humble. I stand before every person bidding them to know me for what I am and asking them to possess me.

I am quietly growing in value through countless days. Though I might seem dormant, my worth increases, never falling, never ceasing. Time is my aid and the ever increasing population adds to my gain. I defy fire and the elements, for they cannot destroy me.

My possessors learn to believe in me and invariable they become envied by those that have passed me by. While all other things wither and decay, I alone survive. The centuries find me younger, always increasing in strength. All oil and minerals come from me. I am the producer of food, building materials and the home to every living thing. I serve as the foundation for homes, factories, banks and stores.

I have not been produced for millions of years yet, I am so common that thousands, unthinking and unknowingly, pass be by.

Who Am I? “I Am Land
Anonymous

In this statement, the author mentions the values of Land several times. In the first paragraph it states “I am the basis of all wealth…” The second paragraph states “I am…the right hand of capital…” The third paragraph “I am…the cornerstone of security… handed down through generations, as a possession of great wealth.” The forth paragraph states “I am quietly growing in value…my worth increases…”

Writing to Gloria, I commented to her about the current state of our economy pointing out that for years I have advocated diversifying investment portfolios to include Land holdings because of it historic stability and ever increasing value. During our resent and current debacle in Wall Street, as everyone and I do mean everyone watches their investment portfolios diminish, those who are wisely holding Land investments have not lost a dime. Land prices during downturns usually stabilize and hold there value during the financial storm.

Several of my investors have contacted me in the past several months thanking me for advising them to diversify their 401K, Sep Plans and Trust Accounts into Land holdings. On the other side of the coin, I have had even more potential clients that would not commit to Land Investments contact me saying that they wished they had diversified their holdings into Land holding before they lost most of their investment money.

My current position on Land investments is IT IS NOT TO LATE!!! There are tremendous opportunities out there right now, today! Land is the safest investment and usually requires little or no maintenance.

What should you do? First, I strongly recommend that you source a member of the Realtors® Land Institute. See  on this site, one of the top three tabs will say “Find a Land Consultant”. Look for a RLI member in your market area, preferably an Accredited Land Consultant. If you can not find one, contact me below and I will help you. Accredited Land Consultants have completed the rigorous class requirements and have preformed millions of dollars in Land sales.

It is true but unfortunate that when we go to real estate school to obtain our licenses for 160 plus hours of classroom instruction, that the real estate schools throughout the country do not teach anything of value about Land, commercial real estate, property management as so on. Just because a person has a real estate licenses, it does not assure you they have the experience or knowledge to provide the services that a Land Broker with experience can provide. Land investment is like any other investment, in that, you do not want to work with someone who has training wheels.

I sold it about 20 years ago, regretting the need to sell. Even at 2008’s deflated prices, it would move today for at least 50 times what I’d paid, more likely 75.

Since buyer intelligence doesn’t explain my success, what does?

Time and proximity.

Time almost always appreciates land.

The other factor was proximity to a small town with a university engine powering its development…and all the land within convenient driving distance of it.

Current conditions favor buyers of rural property.

First, the economy is pointing down, and economists are fighting over how far it will go and how long it will last. The immediate future looks bleaker, rather than brighter. Unemployment is up; corporate profits are down. Stocks are down by almost 50 percent. Everyone thinks it’s a good day when the Dow Industrials fall by only 200 points.

Second, big banks with their securitized mortgage portfolios are now depending on the U.S. Treasury to offer them something more than what their “toxic loans” are actually worth. These banks are not lending much to anybody, including each other. Buyers of residential property in cities and suburbs are locked up and locked into circumstances where lenders don’t want to risk their money and borrowers can’t find mortgages.

Third, the housing market is getting worse. Some seven million residences are expected to be in default over the next couple of years and more than four million in foreclosure. Prices have fallen by 25 to 50 percent in most places. Their direction continues to be down. Some sales are occurring at those new valuations.

That’s part of the “good” news; here’s the rest.

Mortgage rates are relatively cheap.

Mortgage credit is available in the countryside through the federal Farm Credit Services (click on a state to find local coop information); credit unions; and locally owned banks.

Sellers, who have their property listed in these unfavorable conditions, are motivated. They know that prices are down and buyers are precious. They know that the valuations of a year ago are inflated.

I’m not gloating over these circumstances. I’m simply reporting where I see the real-estate market.

I would advise buyers to look for land that has some, or all, of these features:

• 20 acres or more
• “reasonably divisible” under local ordinances
• buyable at a price pegged to comparables sold five to seven years ago
• physical and legal access, either with adequate frontage on a public road or with a recorded right-of-way easement of sufficient width, usability and without restrictions
• acreage confirmable by survey or deed-mapper program
• boundaries in the deed coincident with boundaries on the ground—no boundary disputes or encroachments
• general warranty deed preferred; special warranty deed is second choice
• fee-simple ownership, including minerals; be wary of property where minerals have been leased or sold
• no environmental deal-breakers—endangered species or their habitat, wetlands, floodplains, archeological treasures, soil instability (landslides, earthquake zones); water pollution, on-site dumps
• no conservation easement or other significant use restrictions
• adequate water for your purposes
• mostly useable terrain—not to steep, wet or otherwise inhospitable
• building sites
• woods that have present or future timber value

As for location, it’s pretty simple. Find a place within a 45-minute drive of a major university located in a small town or city. (I’m not talking about small liberal-arts colleges and community colleges.)

Universities, like land-grant institutions, have a core set of facilities and payroll that will be carried through a recession. In better times, the institution will grow along with our population and its ever-increasing demand for educational credentials and training.

Budgets for public universities are likely to be cut in a recession, but universities don’t disappear.

Faculty are ready buyers for undeveloped country property and older farmhouses.

Universities generate business around them. A university and its micro-economy always drives land prices up in the surrounding area.

Get in now at the right price, and let time turn your profit.

Sometimes that’s true. Sometimes, it isn’t.

If the seller’s something is not worth the discounted sales price, the buyer has bought a bad deal. This happens.

Knowing the difference between a good deal and a bow-wow depends on research and experience.

Land investors often find that their good deals are those where they’ve paid full price for undervalued properties, not where the seller reduces his asking price on an overvalued one. Such buyers know how to figure out when a property is under-priced, their sellers don’t.

Rural property has been appreciating more or less steadily for 20 years. But here are some recent examples of a bite looking for a buyer’s backside.

Corn land for $5,000 an acre. Let’s say you want to buy corn land because crop prices are projected to be strong as is demand for corn-based ethanol. Your choice might be: highly productive corn land (200 bushels per acre) priced at $5,000 per acre vs. so-so land (150 bushels per acre) priced at $2,500. Let’s assume that corn will fetch $3.40 per bushel into the foreseeable future and the farmer’s net will be $1.50.

Each highly productive acre nets $300 per year (200 bushels x $1.50), and each moderately productive acre nets $225. That’s a yearly net difference of $75.

Factoring out all interest payments, it would take 33 years to have the difference in net income from the highly productive acre pay for the difference in acquisition cost. If mortgage interest rears its ugly head, the pay-off time could easily double.

Corn is readily grown on marginal cropland, though it’s a little more costly. Still, my pencil suggests that the so-so land deserves a second look.

How much is deer meat worth? I’ve seen 200-acre hunting tracts — some woods, some open — priced in many places at $3,000 per acre and up…and up some more.

Assuming no immediate timber value on such tracts, does it make sense to spend at least $600,000 (not counting interest and taxes) for the chance to bring home $500 in venison every year?

Even if hunting is your way of life, this is probably not the best way to use your money. A sympathetic, blaze-orange accountant might suggest other options.

Hunting land can be leased, for $5 to $10 per acre. Renting 200 acres for $2,000 annually seems like a bargain.

Much public land is open to hunting for the price of a license.

Hunting preserves and guided hunts can be expensive, but are still more economical than buying an overpriced hunting tract.

Deer are everywhere these days, from the scungiest scrub in nowhere’s middle to my Aunt Lucy’s back yard in a Pittsburgh suburb.

If I absolutely had to own land for hunting, I’d look for something cheap, like fresh clearcuts and old strip mines, both of which provide good habitat.

$4,000/acre timberland. If you find wooded property that your consulting forester says will net $1,000 per acre, does it make sense to pay $3,000 per acre for what will be transformed into “cutover” land?

Maybe. It would have to be located close to a city, and the timbering would not significantly discount the land’s value for second homes. It also depends on the type and severity of timbering that must be done to get the $1,000.  Clearcut land is discounted far more than land where trees smaller than 16 inches in diameter have been left.

If you’re looking for timberland to manage for timber production, you can’t buy it at the price pegged for second-home buyers.

Land with a conservation easement. Many good reasons exist for a landowner to restrict the use of his environmentally important land in return for local, state, federal and estate tax benefits.

If, however, this property is a landowner’s principal financial asset, a conservation easement can turn into the good deed that never goes unpunished. How so?

First, the easement will reduce the market value of the property when it’s put up for sale. One hundred acres with development rights might be worth $1 million; without, $200,000. That $800,000 can buy a lot of medical care, retirement and college education.

Second, the easement knocks out many buyers who would otherwise be interested. You have to find someone who likes the conservation restriction you’ve put on the property.

Third, it reduces the amount of money that can be passed to heirs.

I’ve observed that conservation easements work best with families who have significant other assets to spend and pass on.

I’ve seen many easement properties initially priced as if they did not bear a limitation or prohibition on improvements, timbering or division. They should.

Some buyers, of course, are encouraged to think that a conservation easement adds monetary value to the seller’s land. Not true. (It does, however, add value to the neighbors’ lands.) The seller has pocketed the easement’s value.  It doesn’t convey to the new owner.

Ask an appraiser to estimate what a seller’s land is worth with its easement.

Severed minerals. If the seller is only able to convey surface rights, a buyer should proceed on tippy-toes, not ramming speed. The mineral rights — oil, gas, geothermal, coal, hard rock, clay — may be developed in such a way that the surface is devalued.

Buyers should pay less for surface-only land than for property that conveys with all rights intact.

Severed wind rights. Wind turbines are a sensible alternative to producing electricity from fossil fuels. Turbines, however, can discount the value of surface property, often by a lot.

Severed timber rights. Unless you are looking for cheap hunting land, don’t buy land whose timber rights have been sold.

Non-starter properties. I’ve looked into several dozen mineral properties over the years that were worthless, despite having large mineral deposits. Their problem was that their resources were poor quality, or they couldn’t be produced economically, or environmental factors prevented their development.

One seller had recently bought some 3,000 acres in Wyoming with a 100-foot-thick seam of coal for more than $30 million. He tried to flip it for $100 million until it became clear that the coal was so low in energy value that no customer would buy it. Maybe his acreage was really worth $3 million, soaking wet.

I had a seller tell me once that his property contained more than $100 million in timber, which maybe it did. But whatever the dollar figure, not a tree could be cut, because the state would not issue a timbering permit for this rare timber on this site. It pays a buyer to make some phone calls. The seller, I should add, had made the same call to the same state official that I did…before I did.

Choicy is a good standard to apply to spending large sums of money for real estate. It also helps in deciding spouses and cigars, both of which benefit from careful aging.

Several weeks ago I was asked to help in choosing from a menu of three properties. The buyers could afford to spend about $750,000 in an area about a 90-minute drive from a major city.

Choice A was 40 acres of hilly woods with a relatively new 4,000-square-foot, post- and-beam second home. The land had little value other than privacy protection and woodland recreation. We estimated that about 75 percent of the property’s market value was in the house and three-car detached garage.

The buyers liked the house—lots of windows, granite counters, spacious deck. They could move right in, and friends could be invited for a celebratory cookout on July 4th.  The seller hinted that he could sweeten the deal with his ATV.

Choice B was about 100 acres with a one-story, 2,000-square-foot brick ranch from the 1950s. It was in good shape, but it would not be contemporary without extensive work. It had two smallish bathrooms, a functional-but-not-upgraded kitchen, large living-dining room with picture window, knotty-pine den and small closets. A swimming pond was behind the house.

The back 60 acres was steep mountainside with some old logging roads. Shaley soil and a south-facing aspect made it a not-very-productive timber-growing site. The next possible timber sale was at least five or six decades off.  A stream separated the mountain from the front of the property. The house was built close to a busy two-lane highway. Most of the open acreage between the road and the stream was poor-but-useable pasture in a floodplain.

Choice C was 440 acres of woods that had been selectively timbered about 15 years ago. The logging roads needed to be improved for normal traffic. As a fee property, it included all minerals. A 500-foot-long, deeded, right-of-way easement accessed about 400 acres, with the remainder lying separate on the other side of a public road. An electric line could be run in the right of way.

The topography was a mix of hilly-to-steep mountain land that rose to about 3,000 feet. It was well-suited for timber, wildlife and recreation. Several openings were scattered around that had nice northwest/west-facing views. Two small streams drained it.

The buyers leaned so heavily toward Choice A that I thought that they had already fallen over.

A sung to them because it was a turnkey deal. Nothing had to be torn down, put up or thought through. They pictured themselves in a house that fit their sense of themselves. My friend saw himself astride a new tank-sized lawnmower…with attachments, cutting his new acre of grass. Mainly, he liked the idea of bombing around on an ATV, sort of like Marlon Brando with two extra wheels. He did not share this vision with his wife.

B was their second choice, because it could be occupied immediately even though both sniffed snootily at its Ozzie-and-Harriet vibes. They had fallen hard for the pond, which trumped the house, which they finally allowed “might be turned into something decent.” The pond kept coming up in their conversation.

C scared them. “What would we do with a mountain of trees? There’s no place to live right now.”

When I asked what was their most important objective in buying property, they agreed that it was “investment appreciation.”  “Of the three,” I asked, which do you think will appreciate fastest?”  “The new house, of course.”

I suggested they visit their courthouse and track the tax-assessed values for the three properties and similar properties over the last 30 years. They also tracked appreciation over seven reassessments for other parcels of open land, wooded land and improvements separately.

While all property had been reassessed higher in each round, the most economically productive dollar from an investment point of view was in “raw” land. By itself, open land had appreciated more than land with improvements, by at least two to one. That’s not what the buyers expected to find.

“But we can’t live there,” they said. “That’s important.”

“How many days do you think you would spend on either A or B?” I asked. The answer was only six or seven weekends a year, depending on work and the kids’ schedules.

“But we won’t have the money to build if we spend it all on land.”

The money for a new $200,000, 1,600-square-foot house and pond lay in the separate 40 acres across the road and in about 100 acres of the remaining 400 that they could readily sell in one to three lots. None of the sale acreage was important to their future use of the land. I suggested that they wait a year before selling so as to get capital-gains treatment on the sale. By the time they were ready for retirement, the woods would be ready for another selective cutting that would net a good deal of cash.

They were not tent people, but they could see themselves “roughing it” in a used RV for the first two years.

C’s last hurdle was emotional. They liked A’s house and B’s pond. What was to like about C’s woods?

“Spend a weekend walking around up there,” I suggested. “You’ll either connect or you won’t.”

I’ve always found hilly woods to have more stuff going on than open land; I’m sure that’s not true of everyone. I’m also a shade person; I think beaches should be left for umbrellas and sand crabs. Some reasonable people — and all beachies — will think I’m an idiot.

I prefer more land and less house when there’s a choice. I’ve found that people who move out here always seem to want to add to their land base. It always seems easier to remodel or build a house than to acquire adjoining property. It’s also easier to sell unwanted land from a bigger-than-needed original purchase than to buy a neighbor’s land, especially when it’s not for sale.

Bigger acreages are almost always cheaper than smaller parcels on a per-acre basis. This “rule” allows a new owner to sell unwanted parcels for more than the per-acre purchase price just paid. It’s common to find 100 acres selling at $1,000 per acre with a one-acre lot carved from this tract, selling for $10,000, or more.

The buyers proved more choicy than I anticipated. They recognized that their instincts drew them to the “easiest” deal, which was not the one that best matched their objective. They found more flexibility in themselves, more adventurousness, than they thought they had.

When I suggested that they really needed a four-wheel-drive ATV to look after 300 acres of woods, trump changed.

Based on a statistically valid opinion survey that I conducted with the reflection on my computer screen, I offer six reasons.

First, stocks are easy to buy and sell. Second, they’re easy to follow up and down. Third, each company provides information, the quality of which, it may be said, varies.

Fourth, the numbers and ratios associated with companies and stock lend a certainty to forecasts that gives investors confidence in their crystal balls. Quantitative analysis can always be confirmed by the guy on the next barstool who says he plays the market. Fifth, much investing wisdom is free for the listening, such as Buy and Hold. All such wisdom is true, except when it isn’t. Finally, some ordinary people occasionally win, just like in Vegas.

These reasons don’t bear much weight, though I am personally attached to each and every one.

I’m now inclined to follow a new rule: if it seems sensible to me, do the opposite.

I thought oil stocks would rise with crude surging past $90 a barrel. Nope, look at Exxon and Chevron—both down during the last four months. Given the lack of demand for new housing and tight credit, I figured home builders would fall. Nope, Pulte, Toll Brothers and the others have gone up. Warren Buffet should hire me immediately.

It is certainly true that had anyone who bought the broadest possible basket of stocks many decades ago would have done okay.

As a whole, Professor Jeremy Siegel of the University of Pennsylvania’s Wharton School says that stocks show an average gain of seven percent a year when the data are controlled for inflation. This average works when looking at many stocks over many years. It may or may not work for any individual stock; it doesn’t work for the three lousy decades in our memory—the 1930s, 1970s and this one.

Adjusted for inflation, a dollar invested in the S&P 500 in April, 1999 produced no gain at the end of March, 2008. The performance of big U.S. stocks amounts to an average annual rise of 1.3 percent during the past decade after dividends and inflation are counted in. (E.S. Browning, “Stocks Tarnished By ‘Lost Decade,’” Wall Street Journal, March 26, 2008.)

If you bought any individual stock, it could have gone up, down or disappeared over time. From my perspective, buy and hold makes sense only with a very broad basket and a 20-year-plus horizon. The rule for the stock market seems to be ten years or more of good is followed by ten years of bad.

During this most recent stock-market malaise, Treasury bonds, commodities, real-estate investment trusts (REITS), gold and foreign equities have beaten U.S. stocks. These alternatives can be as difficult to understand as American equities, often more so. But stocks are easy to buy and sell, watch go up and down, etc.

Ordinary cash-strapped, middle Americans usually do better investing in rural land.

Unlike stocks, land investments can be deciphered. Documents and numbers are reasonably transparent. Buyers can learn how to evaluate assets and liabilities. Professional help — lawyers, surveyors, foresters, consultants — are available to help research property prior to submitting an offer.

Scoping a land purchase is not like groping for Braille in corporate reports. It’s more like checking things off a to-do list.

The market for rural land in most areas is transparent. Land of all types is a finite resource. Good land — however defined — is even more finite.

Demand for land grows because America’s population is increasing and the top one-third of our income distribution has discretionary cash.

To get one handle on land appreciation, look at farmland. Values of agricultural land — cropland and pasture — have increased steadily since the mid-1980s.

Farm value in current dollars averaged $2,160 per acre nationwide on January 1, 2007, up from $974 in 1998, a 13.5 percent average annual gain according to the U.S. Department of Agriculture. Cropland during that period rose from $1,340 to $2,700; pasture rose from $489 to $1,160.

The current bubble in prices for corn, wheat and soybeans jacked up average cropland price during 2007. I doubt that corn-based ethanol will sustain the high prices for crops and cropland. Increasing global food consumption should prove to be a reliable driver of American farmland prices.

Timberland has increased in value in almost every part of the country since 2001.
Late in 2005, GMO head Jeremy Grantham, who manages about $100 billion, said that timberland will be the best-performing asset through 2012. His timberland investments have done exceedingly well. Timberland prices are being driven by investors, pension funds, university endowments, developers and managers of Big Money.

In 2007, timberland showed a total return (income plus capital appreciation) of 17.45 percent, according to the National Council of Real Estate Investment Fiduciaries (www.ncreif.com), which tracks farmland, timberland and other real-estate returns.

One study by the James W. Sewall Company shows timberland beating the stock market since 1960, up an annual average of 12 percent for stocks but nearly 14 percent for timberland.

Timberland also gets tax benefits — deductions, property-tax help and possible eligibility for a conservation easement or 1031 exchange — that stockowners don’t.

Both farmland and timberland are now running counter to the slumping stock market. But the value of vacation homes — which are usually more home than land — have weakened slightly along with the decline in price and market for primary residential property.

While sales of both new and existing vacation homes dropped to 740,000 units in 2007, down from the record of 1.07 million in 2006, they still accounted for about 12 percent of all home sales, according to a March report from the National Association of Realtors. The median price of a vacation home in 2007 was $195,000.

One problem in tracking rural land values is that “rural land” is a term that covers a lot of ground—cropland, pasture, hobby/lifestyle “farms” with no significant cropland or pasture, timberland, undeveloped land (non-agricultural land with no timber value), land suitable for residential development, mineral land, existing second-home land, recreational land, environmentally sensitive land and so on.

No one collects property-sales data for all land types from the more than 2,000 county courthouses that serve a significant number of rural landowners. This is a big data-collection and analysis job that a land-grant university should take on.

Texas A&M’s Real Estate Center tracks Texas land values, county by county. That’s the closest we come.

For the individual buyer, the county courthouse offers a quick way to measure local land appreciation.

Spend an hour in the office where property assessments are kept. Identify a parcel of land and go back 25 years to locate a baseline tax-assessed value. Stick with the value of the land alone; forget about improvements, such as houses.

Then dig out the succeeding reassessment values for that parcel coming forward. Reassessment periods vary among states, but all property is usually reassessed every three to five years. The five or more reassessment values will show how one particular parcel has appreciated over time.

Its actual rate of appreciation may be significantly higher than the rate calculated from tax-assessed values, because the latter usually understate current market values in rural counties.

Calculate an annual average appreciation rate, then compare that rate to the seven percent norm for stocks. Track the value of the county’s total land over 25 years to determine how your parcel of interest compares with the appreciation of all county land.

My best guess is that land nearly everywhere will exceed an average annual appreciation rate of more than seven percent since the mid-1980s.

So my hot stock-market tip of the week is this: Buy land.