Should I hold these properties long term or cash in now?

Should I hold these properties long term or cash in now?

Real Estate Investor · De Kalb, TX · Member since 2013 · 21 posts · 16 votes

These properties are probably different than 98% of people on here deal with, but it is my line of business and has been for a long time. Hunting property. I buy, sale and hold, property that is used for hunting and recreation from 30 to 1000 acres, sometimes vacant land I improve, sometimes I build cabins, etc. a lot of different scenarios. For the sake of time I will tell you about a recent scenario. I have a few deals like this one and my instinct is to go long term instead of flipping. 

I bought 60 acres, for $60k, of vacant land unimproved to turn into a duck hunting property. It has the right terrain and geography. I built a levy with a bulldozer to hold water for the waterfowl that cost $6000 and put in an irrigation well, for $12000, to guarantee water year to year. With another couple of small things I have $80K in the property. I can easily lease this property for $8000 a year increasing to $10000 within a couple of years. Once the property is leased it is maintenance free the only thing I have to pay are the taxes, which are about $150 a year. The rent goes up every year and the property appreciates. HOWEVER, I could sale the property $150k yielding and gross profit of $70k. 

This is where I yield to the experts. Should I keep the virtually passive income property? Or since there is an 87% return instantly, should I sell? Thanks guys I await your comments and advice.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y

@Harry Asnien   As long as Dick Cheney is not hunting there insurance should be fine.

@Justin Glass   Nice niche'  I like it.. one thought would be to hold on to these for a few years so you can 1031 them then roll all of them up so you get enough cash to reinvest in a Class A professionally managed income property that sends off true mail money and call it a day.

Although I bet its a lot of fund to build dam's and improve your properties and have free place's to go hunt and meet different folks etc etc.

And in your area you have the freedom to do these things to the properties out west we can't just go build ponds etc water rights are intense and tightly control.. that includes wells and damming up any free flowing water.

Nice Job

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  • Real Estate Investor · De Kalb, TX · Member since 2013 · 21 posts · 16 votes
    11y

    @Andrew Davis 

    I guess what I'm having trouble getting past is that even though I have a 10% COC right now (which is better than I have ever done in the stock market lol), is that even if I didn't increase my rent from 8000 (which I will, but make the calculating easier) in 5 years my COC will be 25%. Then in 9 years my COC will be 100% and then infinite every year after. I know if I stopped right there and didn't buy another property my portfolio would not grow anymore, but as an individual property(not considering refi and buying more properties) does this deal make sense? Not including my rent and appreciation increase.

    This is a great place to learn, and I appreciate anyone's input.

  • Real Estate Investor · De Kalb, TX · Member since 2013 · 21 posts · 16 votes
    11y

    Okay. This is a similar question. Another property I have, after selling a parcel that joined it, I ended up with no money in it. I could sale it today for $120k. I have been leasing it annually for $8000 and the hunting club wants to do a 5 year lease for $40k. They have also done some improvements.

    If you take refinancing, and leveraging it out of the equation, should I hold on to something that won't pay me $120k for almost 15 years? Or should I do the lease and then sale it in 5 years? How is this on the terms of investment? The ROI is essentialy free money.

    I know it kind of depends on what I'm planning on doing with the money if I sale, but how does it stand as an individual investment?

  • Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    11y

    @Justin Glass 

    I like your niche, good job.  For me I'd keep it unless something better came along.  And since you're anticipating little to no appreciation, the play is the cash flow.  So as long as no better cash flow comes along keep the property.

  • Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
    11y
    Originally posted by @Justin Glass:

    Okay. This is a similar question. Another property I have, after selling a parcel that joined it, I ended up with no money in it. I could sale it today for $120k. I have been leasing it annually for $8000 and the hunting club wants to do a 5 year lease for $40k. They have also done some improvements.

    If you take refinancing, and leveraging it out of the equation, should I hold on to something that won't pay me $120k for almost 15 years? Or should I do the lease and then sale it in 5 years? How is this on the terms of investment? The ROI is essentialy free money.

    I know it kind of depends on what I'm planning on doing with the money if I sale, but how does it stand as an individual investment?

    It looks like your return on the property value is roughly 6%(depending on taxes and any other costs).  Not really too bad in this environment.  If you got the value of the land back, could you acquire more similar properties?

    Would the club be interested in buying the property from you?  On a 10 year amortization on a 6% loan the payment doubles, but they only last for 10 years and they own a property at the end of it.

    If they do a down payment of about 27K and you amortize over 20 years, the payment will remain the same - although they would be responsible for the taxes.

    The advantage of owner financing for you is the return of capital.  It seems that the increases in property value are due to the work you put into improving these properties, so I would try to get my capital back to be able to move on to the next property.

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