Are you aware that in the midst of a free-falling housing market, land in many places is appreciating in value? So why aren’t more investors looking for land as part of their investment strategy? The answer is that most investors are focused on the overdeveloped commercial and residential real estate markets and have not considered virgin land as a viable option to build their real estate career.
Earth is the place to be in 2008 and 2009
According to the USDA, there are 2.2 billion acres (yes, that’s billions with a capital B!) in the United States. Of the total amount of land, 1.6 billion acres can be bought and sold. Some of you are thinking, “So what? Are people really buying land, especially when house prices in many places are falling?” The answer is a resounding yes!
In an article for LandFlip.com, Emily Wilson, a real estate agent in Shelbyville, TN (just south of Nashville), was asked to discuss how land is selling in her area. He said, “Acres sell better than houses in subdivisions in our Middle Tennessee area. We sell a lot of horse farms and high-value properties, and the ones that have … still want more, but if it depended on home sales initials to earn a living, I would be crying hard times. Instead, our company’s sales are up $1 million compared to the same period last year.”
97% of the United States is designated as rural land
When most investors think of land, they think of parcels within or near the city limits. Most of these properties are zoned as commercial parcels. I do not focus my efforts on this type of property. But rather, I go after rural or virgin land since 97% of our country is designated as such. Uncultivated land is property that is far from existing development patterns. Also, it has no improvements such as utilities, landscaping, drainage, or buildings. It can be as small as a quarter acre or as large as thousands of acres. The package is most likely on a dirt or gravel road. If one is going to live in it, one would first have to drill a water well and install a septic tank on the property.
The demand for uncultivated land is increasing across the country like never before. One group that is buying land in this economy is:
Retiring baby boomers
According to a survey commissioned by the National Association of Realtors (NAR), 60% of Boomers want to retire to a rural area or small town. Additionally, one in four Americans born between 1946 and 1964 own more than one property, according to a survey of nearly 2,000 Boomers conducted by Harris Interactive for NAR.
Boomers have “an almost insatiable desire for real estate,” David Lereah, NAR’s chief economist, said in a statement. They see real estate as “a way to build and protect a nest egg.”
Why vacant land? “For many people, owning a second home is a dream, but they can’t really afford it,” says Peter Francese, founder of American Demographics magazine, who was asked by NAR to help interpret the survey, “So, they buy a lot “.
Real estate has become a key component of Boomer retirement plans. The July 2008 issue of Business Week reports that “Baby Boomers are retiring at the rate of 10,000 every 24 hours…within 2 decades, a record $17 trillion will change hands from corporate pension funds and pension plans.” 401(k) retirement fund at the hands of a retiree.” This group will continue to direct a portion of their investment portfolio towards real estate, specifically raw land, fueling the demand for land like never before.
For example, a developer purchased a large tract of land in western North Carolina and divided it into 1,800 parcels ranging from 1 to 6 acres. Lots range in price from $40,000 to $100,000 (depending on the size of the parcel and its location in the subdivision). In one year they sold 800 parcels! The essence of your promotional campaign: buy the lot and make your money grow as the property appreciates (just like a stock). At some point, the owner will either build on the lot or sell it. They also offer an affordable monthly payment program for those who cannot pay in full. There is no “deed restriction” for this community, which means the buyer is not obligated at ANY time to build on the property.
One of the other motivations for this generation to invest in land is that they are nervous about having all their funds in stock market related investments. We have certainly seen a lot of volatility in the stock market in recent months. More and more investors take a part of their investment portfolio and buy land. Why? The premise is that historically land has never dropped in value.
Developers are sensing this trend and changing their strategy. In the past, a developer would buy a large tract of land near a city and then subdivide it into lots to build houses on. Now they are buying up land in desirable rural locations across the country, breaking it up into smaller parcels, and marketing it to Boomers. As previously documented, they are having great success.
Even Wal-Mart is tackling migration to rural areas.
FL and AZ are no longer the top destinations for retirees. Retirees are looking across the country to buy rural land on which to retire. The central criteria for your purchase is that the package be within a reasonable driving distance of a Super Wal-Mart and medical care. Wal-Mart has sensed this trend and is building many of its new stores in rural towns at crossroads across the US, opening up areas of land originally considered too remote from amenities and supplies. .
Why is there an increase in interest in moving out of the big city?
Boomers are moving to rural areas to experience the beauty, peace and serenity of the country. Unlike previous generations, they retire early and want to live where they can walk, bike, garden, start a horse farm, or just commune with nature. In short, it is leaving the suburbs and their complications. It is a dream for a fresh start in the “second half” of your life.
I recently spoke with a 50-year-old investor from New York City. He has lived most of his life in an apartment. He commutes over an hour to and from his office daily. She loves to garden, but she has never had a backyard to enjoy this hobby in her entire adult life. She is starting to think about his retirement years. Her dream is to buy a piece of land in rural GA so she can fulfill her longing for a garden and a more relaxed lifestyle. She is working hard to make that dream come true. This is an example of why those nearing retirement see land as part of their future.
Boomers are buying up vacant land in all shapes and sizes
What Kind of Land Are Boomers Buying? Remember that it is about destiny: living in a rural environment. Most envision living on a small parcel of land (20 acres or less). They don’t want a large tract of land as their focus is living close to a small town (close to a Super Wal-Mart and healthcare).
Ryan Folk, editor of LandFlip.com, keeps up with recent land sales. According to Mr. Folk, what is selling? He says: “Small home/retirement lots less than 20 acres… [and] haciendas, haciendas and plantations very large and beautiful”.
Not only are small parcels of land being sold, but there is also a growing segment of Baby Boomers buying hundreds and sometimes thousands of acres. Many Boomers have the financial means to purchase large tracts of land.
I was at a wedding recently and sat next to a retiring army colonel. When he found out that I educate investors on the dynamics of the land, he was giddy! He had a dream of leaving the concrete jungle and starting over in a relaxed and carefree environment, far from the stresses of life. He recently purchased 300 acres in South GA a half hour drive from a medium sized city. During his due diligence (the process of research, by an investor, into the details of a potential investment) he learned that he could subdivide the land. He plans to retire on 50 acres and then subdivide the rest over the next 5-10 years. This is a growing trend among those looking to retire.
How can investors profit from the land?
Some of you ask yourselves: How can I, as an investor, profit from the land? Are there really that many land opportunities that you can break into in this niche market? I have been part of over 600 land transactions. My observation is that there are millions and millions of landowners who are willing to sell. Does it surprise you to learn that in some parts of the country there are more buyers than sellers? I make my living connecting buyers and sellers. The market needs more investors to get involved!
There has never been a better time in our history to profit from the land. Right now there aren’t enough investors to reap the rewards of making a profit on vacant land.
Learn to buy junk since they’re not making it anymore!
Here is your success in real estate.
