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        <title>Real Estate Blog</title>
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            <guid>http://www.selandbrokerage.com/blog/farmland-sure-what-about-all-the-other-land.html</guid>
            <link>http://www.selandbrokerage.com/blog/farmland-sure-what-about-all-the-other-land.html</link>
            <author>John@selandbrokerage.com (John B. Hilton, III)</author>
            <title>Farmland, sure- What about all the other land?</title>
            <description> <![CDATA[ 



The amount of press farmland has received in the last year could fill a few bookshelves. It is amazing that a real estate category that typically turns over at rate of about 3% which is now turning at half that has so much exposure and analysis. So what about all the other land? Recreational land, building land, vacant lots, or any other rural land? What is happening in that market? There seems to be no press and buyers are thrilled.


If you are in the market for land for recreational use or as a building site then now is the time to search. Farmland that may have been split up and converted to transitional development land is a good start. Prices are usually reasonable and tend to mirror more of the residential market values. Interestingly, farmland has historically and is also now the case, not run concurrent with residential market values. The run-ups in values have usually occurred when other sectors are doing poorly so take advantage of market conditions and prices.


If you are looking for a relatively small plot of land; say about 20 acres or less, then a great place to start looking is right here, www.selandbrokerage.com.  It is easier to find what you are looking for when the search parameters are already filtered for you.


If you have a specific area and have narrowed down your requirements and still cannot find anything suitable then search all land listings in the area. If you find a larger tract and only want a portion then contact the agent and make an offer for a split. Many times if you are willing to pay for the survey on the split portion or share in the split costs then a seller is more open to the possibility. Sometimes they will say no immediately and adamantly state they are not going to split the land.  In that case, go ahead and leave your name and number as often times after they think about it they will re-consider.



 

 




Other options include finding two or three small lots (1 to 2 acres) and trying to buy simultaneously so that you have a larger piece. In many failed rural subdivisions this is usually fairly easy to do because you can contact the Homeowners Association (HOA) and ask if anyone is interested in selling their lots. Every time we have listed lots in rural subdivisions almost immediately the adjoining sellers will contact us and let us know they are interested in selling too. However, make sure you find out all the rules and regulations of the HOA in advance because if they continue to charge fees on a per lot basis instead of your one continuous parcel it could be costly. Many HOA subdivisions will work with buyers and may even change rules if necessary because they want the land sold to a buyer that will maintain the land.


written by: Marisa Morgan
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            <pubDate>Sun, 11 Dec 2011 18:09:11 -0600</pubDate>
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            <guid>http://www.selandbrokerage.com/blog/land-disclosure.html</guid>
            <link>http://www.selandbrokerage.com/blog/land-disclosure.html</link>
            <author>John@selandbrokerage.com (John B. Hilton, III)</author>
            <title>Land Disclosure</title>
            <description> <![CDATA[ 
 






 By Lou Jewell


 


Anyone involved in a typical Land transaction, leasing, buying or selling may be exposed to 93 plus potential Land issues. For years now I have advocated for need of a "Land Disclosure" form throughout our country. So far only four states have such a document available for the real estate industry and they are Arizona, California, Georgia and Tennessee.


Most states have "Residential Property Disclosure" forms which are executed at time of the listing by the sellers and reviewed and signed off by the buyers during the offering process. We recommend these forms to also be used even in cases where you are selling without the assistance of a real estate firm.


North Carolina's "Residential Property Disclosure" form has only twenty-one issues, far less than the Land form who should have and fewer than other comparable forms found around the country.


Here are a few examples of the ninety-three plus potential Land Disclosure issues currently in place by the four states previously mentioned.


"Are you aware of any?"




Encroachments


Easements


Endangered species: Plant Animal


Flooding whether currently or previously


Forfeiture of rights (mineral, timber, development, etc.)


Government sponsored clean-up of the property


Goundwater contamination


Illegal uses (manufacture of liquor, methamphetamine, marijuana cultivation, etc.)


Landfill operations: legal or illegal or previous planned


Mineshafts or tunnels


Noxious fumes or odors


Pipelines (natural gas, petroleum, etc.)


Well water contamination: current or previous


Conservation Easements


Stream Restorations


"Are there any Gravesites on the Property?


"Are there any animal cemeteries or animal burial sites?


"Are you aware of the presence of:"


Asbestos, Benzene, Fuel/chemical storage, Paint (Lead based paint) (Other paint/solvents), Methane gas, Pesticides, Radioactive material, Radon gas, Underground storage tank(s), EPA Phase I, II or III studies.


"Are you aware of any past or present issues or problems with any of the following on the property?"


Soil settlement/expansion


Drainage/grade


Earth Movement


Erosion


Flooding


Fissures


Dampness/moisture other than around rivers, streams, lakes, etc.


Sliding


Wetlands or previous wetland areas


Do you have a survey? When was it done? Who did the survey? Do you have a copy? Has it been recorded?


Is or will it be subject to protective covenants, conditions or restrictions?


Is the legal owner(s) of the Property a foreign person or a non-resident alien pursuant to the Foreign Investment in Real Property Tax Act (FIRPTA)?


Is the Property located in an unincorporated area of the county?


Is the Property subject to extra territorial jurisdiction?


What is the current zoning of the Property?


Has the property been timbered in the past 25 years?


Harvest monitored by a Registered Forester?


Timber replanted after the harvest with (species)


Is the property in an Agricultural or Forest tax deferment program?


Coming soon "Carbon Credits" that will also need to be disclosed.




Land can have a lot of issues and knowing all the aspects involved is critical for all involved in any of these transactions.


The Real Estate Industry "Realtor®" program has an established "The Realtor® Code of Ethics" as a guideline for practicing real estate. This code has seventeen articles. Article 11 states:


"The services which Realtors® provide to their clients and customers shall conform to the standards of practice and competence which is reasonably expected in a specific real estate disciplines in which the engage; specifically, residential real estate brokerage, real estate syndication, real estate auction, and international real estate." (Our Professional Standards Committee voted unanimously in Washington in May this year at the NAR Mid-Year Convention meeting to include the four letter word "Land" in Article 11 of the code, subject to the Executive Committee final approval this fall).


"Realtors® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth." (Amended 1/95)


Unfortunately when one goes to real estate school around the country and takes the 160 +/- hours of classroom instruction and testing, they are not taught about Land, Commercial real estate, Property Management, etc., only about residential property and real estate law. Do not assume that all real estate agents have the knowledge in the specific areas of brokerage.


If you are buying or selling Land or Farms or Ranches, make sure to find a member of the Realtors Land Institute to help you in this process. Specifically look for an Accredited Land Consultant, their Designation for those experts in Land who have worked hard to achieve it.


Consult with a Land attorney if you plan to create your own "Land Disclosure" form. If you are a real estate agent, please check with your Broker-in Charge before creating or using even if your state has a standard required "Land Disclosure" form already approved. The potential risks and liabilities created because of non-disclosures can be very costly.


All of these services are provided by Southeastern Land Brokerage and our subsidiaries- contact us today to learn all we can assist you with.


 


 




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            <pubDate>Mon, 05 Dec 2011 18:58:00 -0600</pubDate>
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            <guid>http://www.selandbrokerage.com/blog/timberland-nnvesting-different-ways-to-make-a-future-buck.html</guid>
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            <author>John@selandbrokerage.com (John B. Hilton, III)</author>
            <title>Timberland Nnvesting: Different Ways to Make a Future Buck</title>
            <description> <![CDATA[ 
 


By Curtis Seltzer on November 17, 2009


It's been almost impossible not to make money in timberland for the last 100 years. Whatever type you bought, the only trick you had to know was to hold it for a long time. The trees grew, increasing the volume of valuable timber. The trees upgraded themselves from small-diameters tosawtimber diameters, and when this "in-growth" threshold was cross it multiplied a tree's value per unit of volume many times over. You could cut some trees at the top of the stumpage cycle if you needed cash. And, finally, the dirt itself - often called "bare land" - appreciated as our population grew.


The "strategy" of holding timberland was based on the often unspoken or unexamined assumption that the U.S. economy would continue to grow over the long-term, that cyclical ups and downs would trend up over decades, that people would need to build wood-intensive houses and that wood products would continue to enjoy growing demand.


Most people who bought and held did just fine, because the underlying economic forces performed as expected and the trees grew.


In recent decades, investors have shortened the hold period. "Flipping" made both small guys and the big boys a lot of money. Buying a large tract at a wholesale price (timberland price), parting it out (cut some timber, divide the property and sell it for second-home/recreation buyers) and, maybe, putting a conservation easement on it for the tax benefits-this became a common investor strategy. Flipping shortens the hold period as much as possible.


You can, however, play the flipping game only so many times within a few years. The last flipper in line gets stuck, much like the last guy in a chain letter.


The first investor buys 100,000 acres for $1,000/A and might flip it in three chunks to second-tier flippers at $1,400/A. Each of them might flip their 33,333 acres in ten chunks for $1,700/A. The third-tier flippers might flip their 3,333 acres in ten chunks for $2,000/A. And the fourth-tier flippers might flip their 333 acres in ten chunks for $2,500/A. And sometime between the fourth tier or the fifth or the sixth, the game stops because the increasing smaller acreages have become priced above what the market will pay. At that point, the owner should simply hold and forget flipping.


Any flipper after tier 2 should be aware that the mark-up cap on resales is coming closer.


Most small timberland investors don't apply sophisticated analytical tools to their decisions. They look at the purchase price in relation to comparable values. Or they value the assets in light of the purchase price; if the parts exceed the cost of the property as a whole, they buy. Or they estimate the value of selling some of the land's assets, earning annual income from others and then selling the remainder at some future date for more than they have in it.


Another way of approaching a purchase is discounted cash-flow (DCF) analysis. This technique values an investment by estimating its future cash production and then discounting that number by the time value of the money invested and the risk involved. DCF can be adapted to a single cash event (i.e., buy 100 acres for $500,000 and then sell it for $750,000 five years later, leaving $250,000 in gross cash) or multiple cash events (i.e., a big tract of timberland that is managed to produce timber-sale and hunting-lease income each year, along with sometime sales of pieces of the land base). If the rate of return on the investment is zero or negative after all the costs over time are counted and all the discounts are applied, it's not a good deal. DCF analysis must incorporate assumptions about interest rates, risk and other factors that may be little more than educated guesses. An investment that is vetted with a DCF analysis may or may not work out.


I can't shake the feeling that we may be at a turning point in our economy, one where we can't estimate the future in the ways we've used in the past. A higher embedded riskiness may be our future. This would be the long-term impact of the continuing mortgage mess, all the efforts to address it and all the needed changes that don't seem to be on the national agenda.


Generally speaking, I continue to think that land and timberland will be better investments than stocks, bonds and commodities in the future. Land values will rise because of population growth if nothing else. As a finite resource, more people should mean continued demand and appreciating prices, even if the middle-class shrinks some as the consequence of structural changes in the economy. Timber markets, I think, will change, but the net shake out is likely to be something more diverse-traditional markets, plus biomass energy of different types. Faster growing species will bring down the cost of lumber and its products, increasing demand overall.


I'd look at timberland investments over a three-to-five year period or over a very long time, say 20 plus years. It's the in-between period that I think is unpredictable and chancy.


The rule of thumb I'd suggest to timberland investors is something like this: If the amount of merchantable timber on a property represents at least 50 percent of the purchase price, you're likely to make money either short-term or long-term.
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            <pubDate>Mon, 05 Dec 2011 18:45:46 -0600</pubDate>
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            <guid>http://www.selandbrokerage.com/blog/fourteen-numbers-your-need-to-know-when-buying-country-property.html</guid>
            <link>http://www.selandbrokerage.com/blog/fourteen-numbers-your-need-to-know-when-buying-country-property.html</link>
            <author>John@selandbrokerage.com (John B. Hilton, III)</author>
            <title>Fourteen Numbers Your Need to Know When Buying Country Property</title>
            <description> <![CDATA[ 
 


By Curtis Seltzer 


1.  Acres.How many acres will the seller convey to you, physically on the ground and legally in his deed?  These numbers should be the same, but are often different.


A surveyor can plot the seller's deed description on a topographical map that you can use in the field. The plotting will determine exactly how many acres the seller can convey to you by deed and whether the deed description closes.  If the drawn boundary does not close, there's an error in the description. It's not uncommon to find either more or less acreage on the ground than in the deed.


2.  Tax-assessed value.What is the tax-assessed value of the seller's property?  This dollar amount is supposed to reflect a reasonably current fair market value of the seller's real estate.  It is the number on which the seller's property taxes are calculated.  The number is found in the county courthouse where taxes are assessed.  Tax-assessed values are updated every few years, but they may not reflect actual current market values, especially in rapidly appreciating markets.


3.  Fair market value (FMV).What is the current fair market value (FMV) of the seller's property as an entirety.  You can determine this by hiring an appraiser to do an appraisal for you before you submit an offer.  Make sure that your appraiser is approved by the lender that you plan to use, otherwise you might end up paying for two appraisals. A local real-estate broker can perform a competitive market analysis (CMA) of recent sales for you.  A CMA is similar to an appraisal done by a licensed appraiser, but not as rigorous.  Use the property's FMV in negotiating price with the seller.


An appraisal does not research property for defects in title, acreage and its assets.  The appraisal provides you with an appraiser's opinion about the market value of the property in gross terms.  It generally does not determine the real market value of timber and minerals.


4.  Seller's equity in the property.How much of his own money does the seller have in the property he's selling?


This includes down payment and closing costs when he purchased it, principal that he's repaid and capital improvements that he's made.  It does not include interest that's he's paid on his mortgage, property taxes, insurance, appreciation, depreciation and routine maintenance expenditures.  This number gives you a point from which to start projecting what the seller will make from a sale at various prices and various terms.  It's a good number for buyers to know when it shows a seller making a lot.


5.  Seller's remaining mortgage debt.Remaining debt is the amount of money that the seller has to pay from the proceeds of the property's sale to free the property from a lender's lien.  Subtracting the seller's debt from a purchase price gives you a ballpark idea of what he might pocket before taxes.  The seller may need to pay off other debts that are tied to the property, not just a mortgage. He may also have debt with the owner from whom he bought the property.


6.  Basis.This is a tax number.  It represents what a seller has "in" the property at the time he sells it to you from a tax perspective.  Original basis is the seller's cost of purchase. Over the years, basis is adjusted up or down, according to what the taxpayer has done with the property.  Depreciation subtracts from basis; capital investments add to basis.  The lower the seller's basis, the more profit he's likely to make on his sale.  Profit is figured by subtracting the seller's adjusted basis from his net sales income.


7.  After-tax net income from sale.This number depends on many seller-related variables-whether the property qualifies as a principal residence; whether the seller has held it for more than one year as a property that qualifies as a capital-gains sale; his tax bracket; his income from other activities; the selling price; and other factors.  This number is an estimate of what the seller will have left after all his expenses and taxes from the sale are paid.  There are ways for buyers to help sellers increase their after-tax net income, which can help a buyer in negotiations.


8.  Current values of the property's severable assets.A seller's property can be made up of several assets, one or more of which the buyer may consider to bea saleable asset.  Severable assets can include an unwanted house or acreage, merchantable timber, minerals or mineral rights and unneeded buildings.  The prudent buyer determines the value of each such asset he's planning to sell before making an offer to purchase.  Asset sale is often used to help pay for the purchase of rural property.


9.  Price of the seller's property compared with prices of similar properties currently on the market.This is a difference number, that is, the dollars that the seller's property is above, at or below the price of a similar property.


It's helpful in negotiations for a buyer to have a sense of two scales: first, how  the seller's asking price matches up against what the buyer determines is the fair market value of the seller's property; and second, how the seller's asking price compares with the asking prices of similar properties.  It may be easier to get a seller to come off his price if you can show that his property is overpriced against others on the market than if you can show it is overpriced in terms of its own virtues.


10.  The worth of the seller's property to you.After you've finished all your research into the value of the seller's property, you must decide the right purchase price for you.  This number is not the same as what you can afford.  The right price is often less than what you can swing.  When you believe that $5 is the right price for a hamburger at a particular restaurant, but the menu's price is $9, you are more than likely to order something else or go to another place.  Same with country property.  Keep this number to yourself.


11.  The price you can comfortably afford.This number will reflect how much cash you have to front (down payment, closing costs) as well as the amount and terms of any financing you arrange.  I suggest using more conservative ratios than those that institutional lenders will apply.


12.  Time Numbers.Rural property needs to be evaluated against how long it takes for the owner to get somewhere and for someone-like the local rescue squad-to get to him.  Time is the more relevant consideration than distance, because country miles often take longer to travel than suburban miles owing to slower roads.  A buyer should consider "times-to" the following as part of his pre-offer scoping:  fire station, rescue squad with EMT, on-call doctor, hospital, dentist, job, supermarket, building-supply store, farm-supply store, car dealer for your make, gas station, auto-repair place, library, restaurant, church of your choice, work-out room and dumpster/dump.


13.  Local Appreciation Rate.Assume that you don't improve the property over some period of time, say, five years.  A very conservative rate of compounding appreciation would be three percent; five percent is both conservative and reasonable; eight or nine percent will be in many ballparks.  At a given point in the future, you can project gross profit and net after-tax income from your sale of the property at various appreciation rates.


14.  Liquidity.If you had to sell the property immediately, what price would you put on it?  What price would you need to break even, after all debts and expenses are paid?


When you can resell at a price that at least breaks you even, you can sell quickly and not be hurt. Country property becomes illiquid when it's priced above market-and the seller doesn't budge.
 ]]> </description>
            <pubDate>Mon, 05 Dec 2011 18:44:15 -0600</pubDate>
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            <guid>http://www.selandbrokerage.com/blog/land-hedges-systematic-risk-and-inflation.html</guid>
            <link>http://www.selandbrokerage.com/blog/land-hedges-systematic-risk-and-inflation.html</link>
            <author>John@selandbrokerage.com (John B. Hilton, III)</author>
            <title>Land Hedges Systematic Risk and Inflation</title>
            <description> <![CDATA[ 





 


On Thursday, May 6th, the Dow Jones Industrial Average fell almost 1,000 points, a little more than nine percent, in 16 minutes, and no one knows why. At day’s end, the DJIA was down only 342 points, and everyone didn’t think that was too bad…considering the place it had visited.


 


Fingers of possible blame pointed in many directions—Greeks bearing debt, Jihadist glitches, automatic computer-trading programs, a trader’s “fat-finger” mistake, jitters about financial-reform legislation, too much sugar in Wall Street’s afternoon power drinks, a Madoff mole wreaking revenge.


 


A thousand point drop got me to thinking.


 


I’d been talking to my daughter, Molly, a few minutes before the DJIA’s dipsy-doodle. She works on the speed desk at Bloomberg News in Manhattan, feeding headlines and financial news into the company’s terminals. She’s up to the minute on this stuff; I’m a lagging indicator, often intentionally so. We were talking about the future and how to prepare for it.


 


I said I thought people in their 20s and 30s were going to have a much tougher time earning livings and preparing for retirement than Baby Boomers, because the global financial system — and the American end of it, in particular — seemed increasingly volatile, increasingly fragile and increasingly vulnerable to system-breakups, from both internal and external sources. System risks, in short.


 


This got me thinking about hedges.


 


Gold is often touted as a hedge against inflation. But when I looked at gold price and the Consumer Price Index, I saw that inflation had risen with reasonable consistency year to year while gold was volatile—spiking in 1980 and during the last several years, but lagging the CPI for most of the years in between. One study I reviewed showed the average annual rate of return on gold between 1979 through 2008 was 5.37 percent, most of the gain coming during the last decade, compared with stocks at 11.9 percent, 3-month T-bills at 5.9 percent and rare coins above 10 percent.


 


Gold is a fear purchase, not an inflation hedge. If you think it’s likely that the world will fall apart, you put gold in your bedroom safe so you can buy guns and toilet paper. If that time comes, inflation will have solved itself through collapse.


 


Gold doesn’t behave like a commodity, because people buy it for reasons other than consumption and utility. It’s a non-renewable resource like oil, but it doesn’t get used up like oil, coal and natural gas. It seems to me that people use it as a financial worry bead, fingering it more in times of high stress.


 


When Molly set up her retirement account last year, I gave her the conventional advice about index funds and broad baskets of stocks and bonds. But what I wanted her to do was to set up a real-estate IRA to buy land, which she couldn’t do.


 


An inflation hedge should track inflation…and do a little better.


 


Between 1999 and 2009, the average annual inflation rate has been 2.6 percent. For the 10 years preceding, it was 3 percent.


 


It’s difficult to measure national returns on timberland investments, because tracts vary so much in size, management, types, length of ownership and other factors. The database at the National Council of Real Estate Investment Fiduciaries is widely used for comparing investments, but it’s skewed toward large tracts and tax-exempt investors, primarily pension funds. The same bias is found in NCREIF’s farmland index, all of whom are tax-exempt investors.


 


Nonetheless, the NCREIF average annual timberland return in the 20 years between 1990 and 2009 was 2.76 percent. The average annual return for farmland between 1992 and 2009 was 2.74 percent.


 


Using the NCREIF indexes, farmland and timberland returns did a bit better than inflation during the last two decades. These types of land investments as measured by NCREIF are reasonably good inflation hedges.


 


A 2009 study from Jeff Mortimer at J.P. Morgan Investment Analytics &amp; Consulting found that timberland “…has provided an annualized return of 14.60%…” over the past 22 years while correlating “highly with inflation….”


 


Looking ahead, I see nothing that would suggest that stocks and gold are getting less volatile, and the financial system in which they function seems to be looking more vulnerable, more risky. Whether systemic risk is reduced in the future is anybody’s guess; mine is that it will not.


 


Gold may be the coin of last resort, but short of total collapse, farmland and timberland appear to be better hedges against both less-than-catastrophic events and inflation. If nothing else, land prices will appreciate due to population growth over the long term. And if the toilet-paper choice is between gold bars and leaves, well….


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            <pubDate>Mon, 05 Dec 2011 18:42:28 -0600</pubDate>
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