S.E.C. Real Estate Observer

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Editor’s Note: This article first appeared in the August 1972 issue of the Real Estate News Observer.

“Land, land, land! I’m sick of land,” claim more and more brokers. What the industry is seeing is an overabundance of and packages or land vehicles offered to the market place.

There is a highly competitive field in trying to find a HOME for the many farms, ranches, large parcels of recreation land, subdivision land, potential recreation subdivision land, and ideal for syndication, “path of progress” land, land for this, and land for that!

Land (what they call the vanishing commodity) is certainly in abundance!

“Let’s face it,” cries the broker. “We are listed up to our ears in land.”

Is this the case of too much land? Or is this Mr. Opportunity hidden be-hind a clever mask? Many brokers have created a psychological trap for themselves by mentally starting out on a land-offering in a negative manner — “another land deal.”

To this broker, we offer the concept that by being bigoted against land, you are working with the wrong environment — the people environment. You have surrounded yourself with negative people, and these people will keep you “mentally down.” Your chances of solving a problem for the landowner are, at best, slim!

Many brokers do not understand the fundamental benefits of land ownership. What are the historical benefits of owning land?

1. “Appreciation” is the most classic example. It is known that land offers the owner a chance for appreciation by holding or developing a land opportunity. Most brokers forget to point out that IRS taxes do not have to be paid on land, during the holding period, as it appreciates. This is the reason the tax counselor can point out that land appreciation is a true tax shelter as the investor does not pay taxes on a “growing” asset during a holding period.
2. Some folks strongly believe that heavy savings is the only or best program in investing. Why not “save” in land ownership?
3. Land is an excellent vehicle for those individuals who dislike active management. Never has a tree or a rock called a landowner in the middle of the night and burdened the owner with a leaky sink. Land is a passive management vehicle, and this fact is often neglected by the broker when counseling a potential landowner.
4. Those individuals who actively do something with their land secure even higher returns. Thus, land-owners not only have a chance to market their property, but also have a chance to market their idea. The idea might be rezoning, adding an orchard, subdividing into small parcels, planning a building to be erected on the parcel, or creating a potential park. The list is endless.
5. Land offers a neutral port for the person with improved property who wants to come down and out of an improved investment. He can wait, and sometimes does wait, for months and years, to get out of a real estate problem via the conventional sale. If he took land NOW and didn’t have to wait for an unknown buyer, he might be better off, as a buyer (and this is true) might never show up! The person who is coming down and out of a larger holding will normally find many safe ports in land. The marketplace has many more land owners than “willing buyers.” How many buyers are “ready, willing, and able” opposed to land owners who are”ready, willing, and able?”
6. The Exchange Counselor recognizes land as a neutral vehicle to ride from one investment to another. The classic example is the person with a 12 unit apartment who wants to pyramid into a 24 unit complex. The Exchange Counselor knows it is difficult to find a large apartment owner who will trade down into a smaller property and create a management problem, and normally, sacrifice cash flow. It’s just the opposite of the small unit owner who wants to get into a large property, as it offers a healthier management solution, greater leverage, cash flow potential, etc. Thus, the Exchange Counselor will usually look for a lateral move into a “problem free” parcel of land for the small unit owner, and then offer the land to large unit owners.

The Exchangor recognizes and treats land as a vehicle to travel from one asset to another (like a train between two stations). The land is the train and normally is more acceptable to the larger unit owner as it is a problem free investment. He can use the land as a train to secure greater real estate holdings, or as a step down to eventually get out of real estate.