Investors land in the path of progress for diversification

Rental Property Investor · Salem, OR · Member since 2017 · 696 posts · 660 votes

7y

100% agreed. The best return I have ever had was on 70 acres of what I thought was going to be my hunting preserve just west of Salem, OR. No where near those returns...but VERY good for 4 years of holding and running cows on it.

Very interesting call out Jay, takes some long-term thinking and surplus to invest, but depending on the property (especially ag with the low taxes) you can even make a little on it along the way. Another call out..water rights...even in OR water is an issue and will become more of one in the future.

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Jay HinrichsBusiness Member

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Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Richard Sherman:

100% agreed. The best return I have ever had was on 70 acres of what I thought was going to be my hunting preserve just west of Salem, OR. No where near those returns...but VERY good for 4 years of holding and running cows on it.

Very interesting call out Jay, takes some long-term thinking and surplus to invest, but depending on the property (especially ag with the low taxes) you can even make a little on it along the way. Another call out..water rights...even in OR water is an issue and will become more of one in the future.

not to get to deep into the tulles on this.. but agreed.. water rights are crucial.. that is hampering us on the 117 acres we cant get water and it can only be dry farmed with water we could be making bank on any number of crops.. its at the corner of Jackson school rd and Evergreen.. if you want to google it.. West side of Jackson school rd.. its a no brainer like say its just time/risk.. and maybe I see something and maybe when I am long gone my grandkids will say man Grandpa was sure smart LOL..

We owned a 700 acre douglas tree farm out in Willamina and again on water rights.. we had a huge well and water rights to the Yamhill river.. ( those were very valuable. ) the front 100 acres I busted into 5 and 10 acre lots ( that paid for the whole property) so we did not need the water rights I sold them to a Nursery concern down river for well into 6 figures..

We ended up holding that property 15 years. the timber went from 30 to 40 years old to 45 to 60 which is prime age for that growing site and sold to Stimsom for MANY millions of dollars.. did we have cash flow NOPE.. we cut a little timber along the way maybe 50k a year.. tax as you said were less than 2k in timber deferral.. a year..

this deal came to us and this speaks to keeping your powder dry the guy that owned it was successful Oregon business man he owned it free and clear like you see so much of Oregon ag and timber land.. he needed money like in 14 days for some deal he had.. I suspect it was worth about 3 million at the time.. we settled on 1.7 cash in 14 days.. that's were the deals are made.. and because we were in the logging business and I am an experienced developer in Oregon 3 day of due diligence is all I needed..

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Jay HinrichsBusiness Member

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Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

@Richard Sherman I suspect on BP which is so rental property SFRs cash flow is the only way to invest.. this post probably does not have a lot of interest to most of these investors.. but Land is a fun business done smartly.

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Andrew Neal

Real Estate Professional · Brentwood CA / Dallas, TX · Member since 2016 · 185 posts · 146 votes

7y

@Jay Hinrichs very interesting post. my father in law owns about 40 acres in a small town east of Dallas. for now he enjoys having just enough cows/horses etc to soak up the tax break and he lives on part of it so doesn't have any close by neighbors. Maybe by the time it's passed down to my wife and her siblings Dallas will have continued to expand. Who knows!

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Jay HinrichsBusiness Member

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Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Andrew Neal:

@Jay Hinrichs very interesting post. my father in law owns about 40 acres in a small town east of Dallas. for now he enjoys having just enough cows/horses etc to soak up the tax break and he lives on part of it so doesn't have any close by neighbors. Maybe by the time it's passed down to my wife and her siblings Dallas will have continued to expand. Who knows!

I would think with the massive growth in Texas that buying property ahead of where the towns are moving is a smart play.

especially since development rights there are quite a bit easier than many other states.

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Richard Sherman

Rental Property Investor · Salem, OR · Member since 2017 · 696 posts · 660 votes

7y

@Jay Hinrichs We have to get lunch sometime (I am buying). Willamina is my neck of the woods. I grew up down in Jefferson and have seen most of the corn and mint fields turn into houses for commuters to Salem and Portland.

We split off 11 acres of the 72 acres I talked about above (Eola-Amity AVA, surrounded by vineyards, 1 mile from Hyw 99) and got the old homestead building permit renewed and approved for a home site, sold that 11 acres for $370k...we paid 325k for the whole 72 under 4 years ago (like you said, cash, was in an estate, had to close in 10 days, no inspections etc.) The remaining 60 will go for between 10-14k and acre (so around $600,000 and $800,000k to either a vineyard or a conservation group to protect the oaks.

This is small change compared to what you are talking about but opened my eyes for value. We took some of that money and bought 100 acres with water rights and a lake off Red Prairie (between Sheridan and Dallas OR). Working on getting the lots combined to get a house approved (80 Acre EFU) clear the brush and sell it I think after we fix up the outbuildings. Good place for our cattle herd while we do the work too.

You are right though, the investment is for the big pay offs, cash flow sucks in the meantime haha. BUt timber or Ag reduced taxes make it much better than speculating on lots.

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Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

7y

@Jay Hinrichs. This is a very interesting topic. I think where this can get difficult is how do you know if you are going to hold it for 25 years or 75 years? You just bought land from people who owned it for 25 years. I know people who have tried this and their family has had it for 60-75 years or more. I think it can be a good play regardless though if you’re at a certain income level. Land is much easier to maintain and manage then rentals and the payoff is huge if you find the right buyer/developer

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Jay HinrichsBusiness Member

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Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Caleb Heimsoth:

@Jay Hinrichs. This is a very interesting topic. I think where this can get difficult is how do you know if you are going to hold it for 25 years or 75 years? You just bought land from people who owned it for 25 years. I know people who have tried this and their family has had it for 60-75 years or more. I think it can be a good play regardless though if you’re at a certain income level. Land is much easier to maintain and manage then rentals and the payoff is huge if you find the right buyer/developer

deductive reasoning and also become one with the planning departments and sitting in on the public hearings when they are talking about long range planning..

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Nik Moushon

Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes

7y

I'm am actually going to be submitting an offer today on some forest land near me. Parcel parts of it out to pay off the land then sit on the rest for now. If the sell fast enough I might sell a couple more parcels so I can pay off my house. That not really cash flow like most people would think but its basically like having an extra $1500/month coming in. I have no current intentions of harvesting the trees there BUT if push comes to shove its an option for the future. Plus now I will have plenty equity in two properties that will help be in the future. Assuming this all makes it to closing that it.

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Jay HinrichsBusiness Member

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Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Nik Moushon:

I'm am actually going to be submitting an offer today on some forest land near me. Parcel parts of it out to pay off the land then sit on the rest for now. If the sell fast enough I might sell a couple more parcels so I can pay off my house. That not really cash flow like most people would think but its basically like having an extra $1500/month coming in. I have no current intentions of harvesting the trees there BUT if push comes to shove its an option for the future. Plus now I will have plenty equity in two properties that will help be in the future. Assuming this all makes it to closing that it.

good job.. love timber land.

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Jeremy Mangen

Real Estate Agent · Minneapolis · Member since 2018 · 39 posts · 28 votes

7y

This is brilliant. Definitely something I will start thinking about and looking into for future investments. I do have a friend who when I met him he was just a poor aspiring musician in the heart of Minneapolis. We were best friends for two years before he told me his dad owned over $100 Million in farmland, with most of it in South Dakota and a large chunk in Brazil. That just blew my mind. Shows that land plays are obviously very lucrative when done right. Thanks for the suggestion!

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Joe SplitrockPro Member

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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

7y

Originally posted by @Jeremy Mangen:

This is brilliant. Definitely something I will start thinking about and looking into for future investments. I do have a friend who when I met him he was just a poor aspiring musician in the heart of Minneapolis. We were best friends for two years before he told me his dad owned over $100 Million in farmland, with most of it in South Dakota and a large chunk in Brazil. That just blew my mind. Shows that land plays are obviously very lucrative when done right. Thanks for the suggestion!

That is a lot of farm land. In South Dakota average per acre is around $2500. It could push up to $5000 if it is directly in the path of progress. So owning $100M of land here would be 20,000 to 40,000 acres! Renting farm land is much more lucrative than farming farm land, that is for sure.

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Jay HinrichsBusiness Member

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Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

@Joe Splitrock this is the kind of farm land I am talking about.

https://www.bing.com/search?q=evergreen+and+jackson+school+rd&form=EDGEAR&qs=PF&cvid=3a83354fd6ad4972977a9357b7053d15&cc=US&setlang=en-US&PC=LSJS

this is the 117 acres we have an option on .. one side of the road from us ( Due South) is in the city and fully developed.. citys only place to move north is to our property.. to the west of Jackson school road will U see the flight path for the Hillsboro KHIO airport RWY 28 so no residental under that.. that will all be industrial.. also Intel's Rohnler acres 10 billion dollar fab plant is 2 miles due east. this is high risk high reward.. we optioned this ground for 5.5 million in 09.. we pay 120k a year all goes to principal in yearly option payments.. so I don't know crazy maybe.. I have a group in this although I am 50% of it.. the other are younger busy professionals that have used their Roth in some cases.. But its this type of dirt were once things move its big pay day and you do nothing to manage it.. we harvest grass seed that brings in 20k a year. :) If it was in the city limits today the value would be around 400k per acre..

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Mike ReynoldsPro Member

construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes

7y

Originally posted by @Jay Hinrichs:

AS we all get focused on one or two types of Investment properties IE cash flow is the only thing to invest in or buying for appreciation is better or the combination of both.. However for truly passive long term wealth I feel that searching out those path of progress properties and either paying cash for them or financing them can lead the sharp investor to massive wealth and returns without ANY other involvement other than stroking a check annually for tax's and maybe hiring a farmer to keep the grass mowed..

example is one I close yesterday 37 acres the family bought 27 years ago for 199k .. we closed on it yesterday for 7.2 million cash to them.. they did not even 1031 just going to pay the tax and call it a day..

now I don't know if 199k invested in say a few rental houses over 20 or 30 year run would equate to an exit like this.. but for this family it cant get any more passive.

I have also seen this with Timberland Holders as well.. HUGE gains with no real work on the property.. they use it to hunt and fish and ride quads etc.. so personal enjoyment while those trees just keep growing.

seems like a nice diversification to ones long term retirement strategy.. And one we have implemented ourselves.. we have a path of progress property in Sonoma county ( Rohnert Park ) that just got brought into the city.. we paid under 30k for it 25 years ago and value today is about 3mil.. and we have another big play in Hillsboro Oregon 117 acres we optioned for 5.5 mil in the bottom of the recession of 09.. once brought in to the city this would be worth way north of 50 million.. So if it is not something that I will partake in at my age my heirs are going to be very happy.. and collage will be paid for all the grandkids..

Just some thoughts for all you investors who are sharp and may be able to identify areas were towns will Have to grow.. the biggest money I see made is the farmers selling to us the developers.. at least biggest money with basically little to no work and Risk is just time.

I understand what you are saying and it must be lucrative since so many investors do it. I am just trying to wrap my head around that 30k property you mentioned that is now worth 5 million. So year one you paid property tax on 30k but this year you will pay property tax on 5 million. I know bare land isnt as much as improved but it still would be a big chunk for an investor that didnt have the funds to carry it.

On the other hand, I have seen these farm lands get bought up on the outskirts of town and 2500 dollar a month apartments get built in its place near New Braunfels. I can imagine those farmers got a pretty good chunk. They even leased the land back out to them until they sold. Was kinda weird watching corn grow between the hospital and the apartments.

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Jay HinrichsBusiness Member

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Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Mike Reynolds: