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EnigmaDude (98.05)

Land as an investment

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May 13, 2009 – Comments (13) | RELATED TICKERS: PCL

So what do other Fools think about the notion of diversifying their investments by purchasing vacant land?  I realize that this is primarily a stock-picking site, however, there is a lot of discussion lately about deflation vs inflation, and whether stocks make a good long-term investment right now, etc.

In particular, I am thinking about buying some acreage that is depressed in value but is still in a desirable location for vacation property or retirement.  I would look to hold the land for at least 10-15 years and would expect that by then I could either afford to build a house (or cabin) on the land, or sell it for a profit.  In the meantime I could camp on the land or put a trailer there for my own use.  If things really got nasty I could go hide out there and avoid the big city riots and shootings that some predict are inevitable.

This investment (if I decide to go forward) would represent about 10% of my total net worth, so we're not talking about a huge stake. There are no recurring costs associated with it such as HOA fees or anything other than a small amount of property tax.

Anyone have any constructive comments on this topic?

13 Comments – Post Your Own

#1) On May 13, 2009 at 3:36 PM, janineboulayseib (30.69) wrote:

Call me crazy but the saying that they aren't making it anymore still means something to me. I am a broker in Western NC and we have been swampt with land buyers. That goes to show ya they all cant be wrong.....Good luck with your hunt.

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#2) On May 13, 2009 at 4:05 PM, ChrisGraley (31.57) wrote:

Downside = 15 years of taxes, Insurance, (yes you still need insurance), and if it isn't in a rural area, you have to maintain it or be fined by the city.

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#3) On May 13, 2009 at 4:07 PM, alexxlea (34.71) wrote:

If things get nasty you have to keep in mind that a breakdown of what we consider to be this rather comfortable social fabric would break down and thus a deed to land would be absolutely worthless because the system in place meant to regulate such things would no longer be there. Anyone could go take your land by force and you wouldn't be able to do a thing.

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#4) On May 13, 2009 at 4:09 PM, soycapital (< 20) wrote:

I personally think buying raw land is a good investment, I'm doing the same thing in the Midwest. There are some deals on the market right now, look hard for one.

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#5) On May 13, 2009 at 4:11 PM, yormoneyman (77.86) wrote:

go to http://moneyadice.weebly.com

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#6) On May 13, 2009 at 4:15 PM, Imperial1964 (97.92) wrote:

As with any investment, how good it is depends heavily on the purchase price.  I don't particularly like land (or anything else) for purely speculative purposes, but if you can make income off the land it would interest me. 

Investments that provide a stream of income while appreciating in value are where the real money is to be made.

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#7) On May 13, 2009 at 4:21 PM, motleyanimal (97.57) wrote:

Having watched "Green Acres" many thousands of times during my wasted youth, I am forever frightened by land ownership and agriculture.

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#8) On May 13, 2009 at 4:25 PM, OleDrippy (39.90) wrote:

I don't think it's a bad idea at all.. Taxes/insurance is really cheap and you stand a chance on having the land appreciate (though no guarantees).

 

The real concern is opportunity cost. If you lock up 10% of your net worth in a non returning investment you could be leaving a lot of money on the table. It's just a matter of whether you think the land will outpace inflation and/or that you could invest in something else that would outpace the land. A lot of what-ifs, for sure.

 

Good luck!

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#9) On May 13, 2009 at 6:01 PM, Mary953 (37.48) wrote:

Recent auction in our area netted 26.5 mil.  That worked out to $75,000.00/acre for lakefront property with a nice view of the mountains. Twenty years ago, it was a farm.

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#10) On May 13, 2009 at 6:46 PM, EnigmaDude (98.05) wrote:

Wow - thanks everyone for all the great comments!  I think there is something to be said for a nice piece of land with views of snow-capped peaks, even if it is not the "best" way to invest.  If nothing else, it's a place to escape once in a while and I can pass it on to my kid so she can ride her horse there after I'm gone.

ChrisGraley - thanks for making the point about insurance - I'll have to look into that.

And no motleyanimal - I'm looking for rural land, not farmland  and don't intend to have any pigs around!  A cute blonde in pigtails perhaps...

 Mary953 - now that's a pleasant perspective.

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#11) On May 14, 2009 at 10:40 PM, UKIAHED (81.04) wrote:

Hey Enigma

I'm in favor of a bit of land in the portfolio.  Turns out I made most of my $ from rural land here in CA.  Still a bit to liquidate - but it is down only 10% from peak (scary as non-rural is down 40ish %).  Seems like the worse the economy gets - the more people with money want to own some private land...

It sounds like you already get this - but the three L's are always important - Location - Location - Location.

RE insurance.  Check with your local Farm Bureau.  By joining - you get some good rates on rural land.  A second option if no structures is to think about an umbrella policy to cover you for liability (as opposed to covering the land).  It can be much cheaper - but make sure you are comfortable with the costs/risks vs. savings.

RE taxes - here in CA - we get cut rate property taxes if our land is in a timber production zone.  You may want to find out what different rates your state has available - if any. 

Addnl' investment benefit - should you choose not to live there in 15 years - you can sell and hold back the note.  I'm getting 9 to 10.5% on the first mortgages that I carry back - they don't pay - I get my land back and keep the down...  just another thought on the "investment" side. 

Good luck with the search.

Ed 

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#12) On May 14, 2009 at 10:53 PM, starbucks4ever (99.49) wrote:

I have already done it. May have overpaid a bit, but have no regrets whatsoever. At least I own one real object that is not going to evaporate like Enron or WaMu. And, interestingly enough, it has retained its value far better than the S&P index, although I do expect the index to come back with vengeance in the next couple of years.

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#13) On May 15, 2009 at 8:20 AM, TMFRosetint (99.51) wrote:

I don't own land directly, but hold a small position of my portfolio in companies with large land holdings. My favorite is actually listed on the pink sheets, but it's also the largest private farm in California.

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