Publications

- May 1, 2020: Vol. 7, Number 5

5 Questions: Investing in raw land in America’s open spaces

by Jason Walter

Raw land and property in rural areas seem to rarely attract the attention of investors, however, there is a market for the buying and selling of ranches, plantations, farmland, timberland and recreational properties. And some of the country’s richest businesspeople — cable TV and media moguls Ted Turner and John Malone — the two largest landowners in the United States, own millions of acres of open lands.

One of the organizations that specialize in brokering the purchase of raw land in the United States and other countries, is Greenville, S.C.-based National Land Realty, headed by founder and CEO Jason Walter.

What are the advantages to investing in raw land?

One of the main benefits offered by raw land is and always will be that it is a safe investment. Raw land tends to appreciate, or at the very least keep its value. We saw this clearly in the last recession, and we will see it in the next. The people who buy raw land do not tend to use a lot of credit because they are conservative, financially well-heeled investors. Half of our deals are cash deals, so we have a market that is very stable because there is so very little leverage. And even if you would want to take up a lot of debt, you wouldn’t be able to since banks will almost never finance more than 70 percent to 80 percent of the cost of raw land. If you then also spread your investment over different uses, you are giving yourself an additional layer of safety, so we recommend not putting all your money in timberland, for example, but to also look into farming, ranching or just buying large tracts of land that you will then be able to divide into smaller tracts down the road. The majority of what we sell is recreational land, which is a very stable investment because the demand doesn’t fluctuate much.

What are the advantages to investing in rural America?

It makes a lot of financial sense because the rural land market is very stable. The land can be used in a variety of ways from a personal enjoyment standpoint, and there is a fixed supply of land, which adds to protecting the value of the land and helps ensure that it will hold its value better than other asset classes.

What are some of the precautions investors must take into account when investing in raw land and rural areas?

They need to do their homework. Acquiring information on agricultural land can be quite challenging. We sometimes see investors paying more than the land is worth. For example, when someone purchases a home it is fairly simple to see what the average price per square foot is for homes in that certain area.  However, when it comes to rural land, this is more challenging. The data is limited. In addition, even if you find comparable properties, you have to have the knowledge to compare tracts of land. For example, one tract might have more usable acreage. Another tract might have better soil for growing crops.  Some tracts won’t perk and some will. These multiple variables open up investors to risk. This is why having a knowledgeable land broker is so crucial. Specialized brokers can help investors avoid very expensive mistakes.

The country’s biggest landholders, billionaires such as Ted Turner and John Malone, are heavily invested in vast, rural areas. What do they know about investing in rural environments that other investors don’t know?

Well, I already talked about the supply of land being fixed, so these investors are truly taking advantage of that. They are in a position where they can have an effect on the market by setting the price of land themselves by acquiring a majority of it in certain locations.

 

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