Sunday, May 23, 2010

Rural Land Investors need to be Able to Act Quickly

In order to get the best deal when investing in rural land, you need to be able to act quickly when an opportunity presents itself. Being able to decide on the spot whether a property is the right investment can mean the difference between making tens of thousands of dollars and missing out completely.

In the last week I dealt with an investor that missed out on a prime opportunity and also spoke with another one that hit a home run and doubled his money in a few weeks.

A few weeks ago an agent informed me about a new listing on some hunting land in Perry County, Alabama. It was priced as a wholesale buy, so I went the next day to preview the tract. On the way I called a buyer I had been working with for a year to let him know he should be ready to move if this tract was good. As I walked the land, I was impressed with the mature timber and potential the tract offered. This was a no-brainer as an investment. My buyer looked at the tract and 2 days later made an offer. He tried a low-ball offer to "just see" what they would say. The sellers finally countered back 2 days later at full price. My buyer waited a day and agreed to their terms. Over the next 36 hours it all fell apart. The sellers decided they needed $40,000 more than they were offering the property for originally. Due to some behind-the-scenes advice from a relative the sellers decided they were pricing their land too low. I firmly believe that if we had made a full-price offer on the spot, we would have been able to close the deal. Had we not taken a week to come to terms, I believe we would have been able to flip that property quickly and make a tidy profit.

The investor that made money previewed a relatively small timber tract that happened to be loaded with mature timber. He negotiated a price of $1000 per acre for the tract. The timber value alone on the tract was worth more than double what he paid for the land, and he sold the land to an adjoining owner after he cleared the timber. They only held the property long enough to harvest the trees and then sold the tract. After all was tallied they got a 100% return on their initial investment. He was able to do so well because he saw an opportunity and acted quickly to secure the deal.

The moral of this story is: Prepare yourself so that when an investment opportunity arises you can quickly evaluate and act on it. Here are a few things you can do to help you be ready when the right deal comes along.

1. Educate yourself about the Rural Land Market. Browse land listing websites, talk with a land agent, get comparable sales information from lenders. The key is finding out what people are currently willing to pay for land in your area.

2. Clearly outline your investment objectives. Is your desire to turn a profit quickly or achieve a maximum return? My personal philosophy in this market is: "Buy low, sell low." If an investor is seeking to make gains in the short-term, the tract needs to be priced lower than competing properties. If the objective is to maximize profits, then an investor needs to be able to buy and sit on the asset until it appreciates.

3. Identify your target market. Who would be interested in a property of this type? What do potential buyers expect when looking at rural land? Is a tract set up for hunting, timber, horseback riding? Does the property offer power, utilities, trails, road frontage, easements, surveyed boundaries, a water feature, or food plots? The presence or absence of these features affects pricing, and should be factored into your decision to invest. Assess the features and who would be interested in purchasing land like that.

There are many other components to making good investment decisions and many ways to make money buying and selling rural land. If you look long enough and know what to search for, the right opportunity will eventually present itself. By doing your homework on the front end and staying current on the rural land market you can increase your chances of being ready to pull the trigger when the right ones come along.

If you would like more information about what is happening now in the rural land market in West Alabama, please feel free to contact me.


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