S.E.C. Real Estate Observer

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Editor’s note: This is the first in a series of articles on land development that we hope readers of the S.E.C Observer will enjoy and be able to use in their business practices and investment activities.

WHY INVEST IN LAND?

Some of my fellow S.E.C.’s and other investors have asked me “Why land? It doesn’t have any income.” While that is true, there are many advantages of investing in land. But to start off, I have never had a roof leak or commode overflows on a piece of development land. I did have a Port-a-Pot turned over once but that wasn’t a really big deal. No one was using it at the time!

Land is easy to insure and maintain. There are no roofs or HVAC units to replace and usually it doesn’t make any difference if it is raining, hot, or sleet and snow. The land is just happy to sit there and hold the earth together.

FLEXIBILITY:

But the real reason I like land development is the profit potential. Jeff Drinkard, S.E.C. once said, “I like land because every time I touch it, it should increase in value.” Jeff is so right. Now, before you think I am nuts, I will tell you that I do remember the 1980’s. Land value doesn’t always go up. But good land will survive the downturns. It does not depreciate like an office building will. And, it never gets obsolete.

BUY IT RIGHT:

But let’s think about it. We find an attractive tract of land in the path of progress. Jack Hunt, S.E.C., will tell us that we must make our money on the purchase. He is right too. The biggest mistake we make is beginning to believe our own emotions and pay too much for anything. Development land is no exception. What is too much? Start from the finished business plan. That requires us having a use for the land and some idea of what the income will be. With that in mind, one can begin backing into what the land might be worth. Establish that floor and get yourself some cushion – in other words, buy at a discount.

Author’s note: In the next issue of the S.E.C Observer, I will talk about “Building a Business Plan”…about how to get others to fund land infrastructure and who should be on your land development team. If you have any questions, feel free to contact me via e-mail at: wes@wilson-stonaker.com.