Investing in Land: True Value

When one begins to think about investing in an asset they usually have a couple of goals in mind.  First, they are usually hoping that their invesment will increase in value.  Second they are trying to protect their future ability to utilize the asset.  Relating this to land…When someone buys a parcel of land, they hope that the parcel of land will increase in value and they have protected themselves by investing in a tangible, usable asset.  This is a lesson that wealthy families, families that have wealth generation after generation,  have known for quite sometime.  It seems simple, but few actually put it in practice.  Land is much prefered to carry wealth over from one generation to the next.  Most of the wars that have been fought in the world have been for control of land in some fashion.  Land is the essence of what God used to make us and what sustains us. 

Genesis 2, 7-9
And the Lord God formed man of the dust of the ground, and breathed into his nostrils the breath of life; and man became a living soul.  And the Lord God planted a garden eastward in Eden; and there he put the man whom he had formed.  And out of the ground made the Lord God to grow every tree that is pleasant to the sight, and good for food; the tree of life also in the midst of the garden, and the tree of knowledge of good and evil.

A little more knowledge about the mechanics of why people who invest in land tend to be wealthier over time…National Forest

Land is a very effective hedge.  A hedge is something that protects something of value.  In the case of land investing, it hedges against loss of purchasing power.  When one has gathered purchasing power, they tend to want to keep that power, and investing in land gives them a vehicle to do just that.  Investments in commodity-producing land, land that is only valued for it’s ability to produce a commodity, generally does that.  It protects the real value of the purchasing power that it takes to own the land.  Real value is the purchasing power that owning an asset gives its owner.  Land generally does this while producing income from the production of the commodity.  As a society, we tend to think of our purchasing power in monetary units…dollars, euros, yen…  Monetary units are not purchasing power.  These units simply represent the purchasing power that an asset currently has.  This is the nominal value.  The value of an asset expressed in a monetary unit.  Hedges protect real value.  Effective hedges, such has land, protect purchasing power against inflation and deflation.

Wikipedia – Real versus nominal value – http://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics)

For example…

In 1975 Mr. Brown had $12,000.  This $12,000 represented enough purchasing power for him to buy a new car for his wife, a new pickup for him, a new tractor for the farm, and a small fishing boat, or he could buy 60 Acres of Timberland in Clay County, Alabama that was for sale and joined US Forest Service owned land in the Talladega National Forest.   Mr. Brown had to decide which to spend his money on.  Mr. Brown was still young, just 30 years old, but he knew he needed to be thinking about financial security for him and his young family.  He decided to buy the 60 Acres of timber land and forego buying any of the other things for the time being.  He really wanted the new car and the new pickup, but the ones they had were paid for and still in good working order.  He did not really need the fishing boat and he could get by with the tractor his dad had given him several years before.  The 60 Acres of timberland had just been cut about one year previous, and the seller was willing to have the trees replanted.  The land had frontage on a county dirt road, and was well away from any houses.  He reasoned that he could use the property to teach his children to enjoy the outdoors…maybe hunt the land, and fish the pond that he thought he might build on it some Pondday.  He negotiated with the seller, and walked away from closing with a property that was newly planted in pine trees, and $1,000 left over to build that pond he was thinking of.  There was a nice little stream on the back of the property that was situated just right for a small dam and a small 1 acre pond.  10 years pass.  In that time, Mr. Brown and his son have hunted on the property every year.   His daugther grew to absolutely love fishing in that pond.  Mr. Brown’s wife liked that he was no longer spending money to be a part of that hunting club anymore too.   It was valuable time that Mr. Brown was able to spend with his children there.  Much more valuable than any of the things he could have bought with the $12,000.  In that 10 years the trees had gotten much larger.  It would soon be time to thin the stand to reap a little of the benefits of timberland ownership.  He waited another year for the pulp market to reach a peak and then sold 1/3 of the timber on the 60 acres.  He sold the timber for enough to finally buy that new tractor he had wanted.  Another 10 years go by…its now 1995.  Both of Mr. Brown’s children are now in college.  His son took a nice 8-point buck on the property when he was 16 and his daughter still loves spending time with her dad down by the pond at the “old woods place”.  Mr. Brown knows that it’s time to cut the timber and start the process over again, and he sure could use the money to help fund college expenses.  He sells the timber, except for 5 acres around the pond, and  gets enough to pay for his childrens college tuition.  He has to scrape together a little money to replant the timber, but he looks back and figures it is a good investment to do so.  A few years later, Mr. Brown gets a call from a local real estate agent.  The agent tells him that he has someone looking to spend about $100,000 to buy a hunting / timber property.  Mr. Brown’s seemed to fit what the buyer was looking for.   Mr. Brown told the agent he wanted to think about it for a day or two, and get back with him.  Mr. Brown went down to the place and looked at his young, growing investments.  He looked at the pond, and the small field where his son missed his first deer.  Then he though about what that $100,000 would buy him…the purchasing power that owning that land gave him.  He reasoned that for $100,000 he could buy a new car for his wife, a new pickup for him, a new tractor so that he could give his to his son, and a fairly nice fishing boat.  On his way back home, he thought about what other things that invesment had provided him with through the years.  Money for that now aging tractor, money for his children’s college education, time spent with hisfield family that no amount of money could buy.  And he reasoned that he had gotten all of that and the land was still worth, in real value,  about the same amount since he could still buy the same things with that purchasing power.  So he promptly called the agent back when he got home, and told him that there was no way that $100,000 would ever come close to the true value of the property.  He went on to say that he was going to keep the property to give it to his children, so that they could reap the benefits of it’s true value. 

Mr. Brown took $12,000 dollars in 1975, that would have bought many things for him and invested it in land.  He reaped both economic and non-economic values from the investment during his ownership of the invesment, and still had the same amount of purchasing power 25 years later.  This is not a far-fetched example.  This does happen.  Land was an effective hedge for Mr. Brown.  It protected his purchasing power, the real value.  He learned that the nominal value of $12,000 in 1975 was about the same in terms of real value as $100,000 was in 2000.  He learned that the true value could not be expressed in 1975 dollars or in 2000 dollars.  He did all of this while being a good steward of what God created and of what sustains him.

119 Acres Alabama Timber Land For Sale – Update

I went out and looked over this property last week.  It really is just as described.  Big Timber, nice creek, great trail system, Big food plots, paved frontage, and easy access from Atlanta’s south side or the Auburn area.  Yesterday, I spoke with Randy Cound, with Canal Wood about the property.  He managed the last thinning on the tract and says there is likely $1,000+ per acre in standing timber on the property currently.  The place lays great.

119 Acres of timber land or hunting land in Chambers County.

Price Reduced to $285,000

Lots of Valuable Sawtimber ready to cut right now!

Nice gently rolling mixed timber tract with a nice creek and branch, big food plots, paved road frontage. There are roads, trails, and controled access to the property. Notice the nice hilltop in the center. Electricity Available! Lots to offer here at a great price. Located near Roanoke, Alabama,… LaGrange, GA and Lake West Point. Just a short drive from Newnan and Peachtree City. This is a great all-around hunting and timber land investment tract.More info

Tallapoosa River Property Price Reduction – OFF MARKET

OFF MARKET
This property is currently off the market.

Was $230,000,
NOW JUST $190,000

38.63+/- Acres on the Little Tallapoosa River. Located on Randolph County Road 532 north of Wedowee. Mature timber on 20+ acres along the river. Paved frontage on 18+ acres, County dirt road frontage. Fishing, hunting, canoeing, home sites…lots of potential. Great investment property.

SOLD! 95 Acre Farm in Cleburne County Alabama

95 Acre Farm joining the Talladega National Forest in Cleburne County, Alabama – SOLD!

Farm in Talladega National ForestCheck out this farm land and home for sale.  It’s one of the prettiest places I have ever had the opportunity to market.   I absolutely love showing it, because I see something new and beautiful every time I go out.  Turkeys, the lakes, the red barn, rolling pastureland, mountain timberland…it has it all.  Located in Cleburne County, Alabama; just minutes from Interstate 20 and a short drive from Atlanta, Georgia and Birmingham, Alabama.

http://cleburnecountyfarmnearcheaha.wordpress.com/

SOLD! – 2.53 Rural Acres near Hollins, Alabama

Hollins Small Acreage 008SOLD!! — 2.53+/- Acres located on Bull Gap Road just north of Hollins, Alabama. Wooded with a stream, cleared house site, unrestricted. Paved frontage. Located in a safety zone inside the Hollins Wildlife Management Area. Near the Talladega National Forest and Sylacauga, Alabama. Gently rolling. Great place for your home, mobile home, or RV. Electric service runs right by the property. Small, inexpensive, rural acreage!  Listed at only $15,000.   Visit the link below for more pictures and information.

http://robertking.net/or/index.php?action=listingview&listingID=175

Article on the Talladega National Forest

Here is a really good article I ran across today that tells about some of the recreational opportunities in the Talladega National Forest and the Cheaha Wilderness.  I found it on www.GORP.com

Central Alabama’s Talladega National Forest makes a great comeback story. It is a wonderful example of what can happen to land that was formerly cut-over and abandoned. Before it was bought by the federal government in the 1930s, the area that comprises the Talladega was some of the most abused, eroded wastelands in all of Alabama.

Since the Appalachian Trail starts in Georgia, that’s where many believe the Appalachian mountain range begins. Not so. The southern edge of the Appalachians is in Alabama, in the Talladega Division of the Talladega National Forest. This is an achingly beautiful area of rugged mountains, forests, waterfalls, and streams. The tiny Cheaha Wilderness preserves a portion of this natural wealth near Rebecca Mountain. Many believe more of this region strongly deserves such protection.

The Talladega’s profusion of wildlife is exceptional. Squirrels, rabbits, grouse, white-tailed deer, turkeys, and bobcats are here year-round—in abundance. The pine forests of these hills have been managed to give sorely needed nesting areas for the endangered red-cockaded woodpecker. And hordes of migrant songbirds pass through in season, especially spring: warblers, indigo buntings, tanagers, brown-headed nuthatches, and more.

This is the Deep South. Spring and fall are favorite times to be off and about in the forest; summer can be hot and humid.

READ MORE:  http://www.gorp.com/parks-guide/travel-ta-talladega-national-forests-alabama-sidwcmdev_066867.html

Alabama Land Easements – Land Accessibility

Legal access to land is an issue that I deal with a great deal.  Land that borders a public access road usually does not have issues.  The possible exception to that is where some geographic feature at the roadside prevents access to the property (a large bank or deep gully).  However, in rural areas, many properties do not border a public road.  Properties that do not have frontage on a public road are said to be “landlocked”.  This means that you must travel over a property owned by someone else in order to get to the landlocked property.  I certainly do not recommend doing this without the permission of the owner of the property over which you will be traveling.  This is a trespass. 

Many times these issues are settled with a simple phone call to a landowner who gives you permission to cross over his land in order to get to yours.  This is what happens 90% of the time.  Most times landowners have no issue with allowing you access to your property.  Part of this is because they just find it to be the neighborly thing to do.  Part of this is because they know if you push the issue legally, you will probably win.  Here’s where the rub comes in.  Most lenders will not lend on property without a written, legal easement or road frontage.  If you are considering buying a landlocked property and need to borrow money on it, you need to make sure that it has a legal, written easement…one that is recorded along with the deed to the property.  Gentlemen’s agreements are not legally binding access agreements.  An unwritten access agreement may be just fine for a timber property or a hunting property that you will pay cash for.  If you ever want to develop the property in any manner you will probably need electricity though.  Getting electricity in a conventional manner requires an easement for landlocked properties. 

Curtis Seltzer recently wrote an article posted over on the LandThink blog about easements, and when you should and should not buy landlocked properties.  In October 2008 Curtis wrote a couple of articles explaining easements.  This is a real opportunity to read up on a subject that is all to familiar to people in my industry and almost completely not understood by the general public.  If you work correctly with a landlocked property, it can be a GREAT investment.  If you do not, it can be a nightmare.  Take a look at these three articles:

What’s an Easement Part 1 – http://www.landthink.com/land-ownership/easements/whats-an-easement-part-i/

What’s an Easement Part 2 – http://www.landthink.com/land-ownership/easements/whats-an-easement-part-ii/

Should you Buy Property Without an Easement? -
http://www.landthink.com/land-buying-investing/legal-issues/should-you-buy-property-without-legal-access/