It is no secret that this is a great time to invest in land. Prices and interest rates are down and a housing recovery is inevitably going to arrive. (This fact seems to have been beaten to the ground recently so I will just recommend reading Over the horizon, a housing recovery from CNNmoney.com for the latest summary of why.)
Knowing that you should buy won't matter if you do not think you have the means. Not many people believe that they have either $30K, for a cash purchase, or $3-6K that is needed for a down payment, just lying around. Luckily, there is a well of funds that many people can tap into: their IRA. An IRA is a wonderful source of investment capital that most people fail to take advantage of. Escapehomes.com gives a good overview of the two ways in which an IRA can be used to purchase property in the article Using IRA Monies to purchase Real Estate, written by Nick Herak.
The first way is for the real estate to be owned by the IRA. This requires moving your IRA to a self directed IRA custodian that allows real estate. The custodian will be the owner of the real estate. Since the real estate is inside the IRA, the real estate comes under the restrictive IRA rules and law. All proceeds must go back into the IRA. You cannot use your IRA to purchase your own residence, condo or any property in which you or your family live or work. In addition, if the real estate is a rental property the custodian will require the investor to appoint a property manager. Also, the IRA owner must comply with minimum and mandatory distributions, non-compliance penalties, transferability and/or taxes. Most people are not aware, that when distributions are taken from an IRA, the distributions can be taxed at the owner's highest marginal income tax rate.
The second way real estate can be purchased is outside an IRA and owned outright. The IRA funds the real estate purchase and the owner can now take advantage of a full range of the financial and economic benefits real estate offers. Occupancy is now possible. Capital gains tax treatment, depreciation, additional write-offs, rental income flexibility, a stepped-up income tax basis and the personal residence exclusion become possibilities. Leverage is now a financial option for the real estate investor. The IRA can completely or partially fund a real estate purchase. You can even share ownership with others. You can buy a commercial building, land, a second home, a condominium, an office building, a rental property, a ranch etc. If you are leasing a building, you could purchase your own office and recover your lease payments
Obviously, with the complex nature of these dealings, it is recommended that you consult a legal or financial professional before you decide to do any investing with your IRA. The important thing is that you become aware of the fact that it is possible to put money that you already have into a safe and profitable long term investment: land.
Right now there are certain "bubble markets" like Florida and the Southwestern US that are especially ripe for investment. Click here for more information on Western Land for Sale or Florida Land for Sale.
There are 2 facts that seem inescapable anywhere you look:
1) Oil has gotten really expensive
2) There is a huge oversupply in the housing market
So what does this mean for us in the land business and you as a potential buyer?
Let’s look at oil first. In October of 2005 a barrel of crude went for $60 and now it is $135, while your average gallon of diesel has gone from $3.20 to $4.38. When you think about a fully loaded dump truck getting about 6 miles per gallon you can just begin to imagine how this effects development costs. Throw in the fact that asphalt and PVC piping are completely oil based and it is pretty easy to understand how oil alone has increased road building costs by 50% in the last few years. Simply put, it costs a lot more money to move dirt around now.
Now, about the oversupply in the market. In order to move houses or land in today's market, the seller is forced to sell at the lowest price possible. This oversupply has also brought construction of new properties to a crawl, as not many can afford to add to the crowd of unsold lots and sit on their new parcels. This natural correction means that as sales pick up, the excess inventory will shrink rapidly. Once inventory is at an acceptable level, we can expect to see construction ramp up again.
So to put it all together: Due to the dramatic increase in construction costs, properties built now or in the near future simply cannot be sold for less than those built a few years ago. Developers are selling land at the lowest price possible due to the oversupply in the market, which will quickly even out and raise prices. For the consumer, this means that if they can find land that was developed a few years ago this is a very attractive time to invest, especially in traditionally popular markets like Florida. (Click here for some developments currently available in FL: Florida Land for Sale) With a little patience, investing in land right now can prove to be one of the best decisions you can make.
For the second year in a row, Scranton, PA has made it on Money Magazine's "10 Fastest Growing Real Estate Markets" list. (click here to view the cnn.com mention: 10 growing real estate markets)
Landview Properties is a developer that has several communities available in the Scranton/Wilkes-Barre area, including its brand new project, Blue Heron Woods. Click here to check out all of their properties for sale: Northeastern Pennsylvania Land for Sale.
Two weeks ago Cyril Moulle-Berteaux made a bold statement in the Wall Stree Journal. In his article, "The Housing Crisis is Over", Mr. Moulle-Berteaux stated that "...it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now." (To read the entire article, click here: The Housing Crisis Is Over)
As contrary as this may sound to what we have been hearing lately, Moulle-Berteaux makes a convincing argument. He starts by reminding us that the current housing collapse is almost three years old, with home sales peaking in July of 2005. He then goes on to explain that housing affordablilty is the cause of both the housing bust and its eventual recovery. During the boom of the 1990's and early 2000's people spent 19% of their income to pay their mortgages, 29% for first time home buyers. By 2005 and 2006, this went up to 25% and 37% repectively, which simply priced people out of potential homes. Home prices have now fallen 10-15% while incomes have continued a slow growth, along with mortgage rates that have declined 70 basis points from their highs. This combination has brought affordabilty back to the level of the 90's, with homes costing 19% of monthly income for the average home buyer, and 31% for the first-time buyer.
The Bank of Canada seems to support Cyril Moulle-Berteaux's assertion. A 2007 report realeased by The Bank of Canada named Housing Market Cycles and Duration Dependence in the United States and Canada by Rose Cunningham and Ilan Kolet made several interesting findings. Cuningham and Kolet found that on average, North American housing cycles average 5 years of expansion and 4 years of contraction. They also found that expansions tend to be duration dependent, meaning that the longer the expansion continues, the more likely it is to end, while contractions are not. The report goes on to state that "...policy makers may have more traction in housing market contractions than in expansions" and that "real estate interest rates and real incomes largely explain the duration of housing market contractions."
So coming back to the here and now: interest rates are down, income has grown, and policy makers have been aggressive in trying to revitalize the housing market. These factors and others seem to predict that the housing slump is near an end, or has already bottomed out as Cyril Moulle-Berteaux suggests; and once sales rise, prices will soon follow.
1) The importance of buying land from an experienced and well financed developer. Reputable, experienced land companies have done all the research, testing, and surveying of their properties and have the ability to deliver on their promises.
2) There is no outside real estate commission involved when you are buying directly from the developer. Real estate agents make their money on commission and cutting out this commission leads to lower prices.
3) There may be clear financing advantages when the seller offers financing or aligns itself with a bank. Developers can often finance a property when banks do not, giving land buyers more flexibility in what they can purchase. Additionally, the developer can simplify the loan process with the banks that they deal with.
4) Developers often have more competitive prices than private sellers. Developers do not have the option to “sit” on a piece of property. The business depends on selling land, and they are priced to do so.
US Land & Ranches has been developing and selling land throughout the country for over 25 years. We stand by all of our thoroughly researched and carefully planned projects, past and present. We sell land with a variety of features in many different locations, meaning we have something for just about everyone. Look around and feel free to give us a call, we would be happy to provide you with more information.
First Year Anniversary Makes for a Successful Weekend at Water’s Edge Ranch
Current owners and new buyers mingle as they preview Texas Land & Lakes’ waterfront property
Athens, TX - Water’s Edge Ranch is a lakefront community from Texas Land & Lakes located in Athens, TX, about an hour southeast of Dallas. It recently celebrated its first anniversary on the weekend of March 15th and 16th with a successful sales event. The event included current owners and prospective buyers discussing the property and their experiences with Texas Land & Lakes, as well as property previews and informational sessions with the sales people. The beautiful weather and relaxed atmosphere were complemented with ham and sliced brisket from Cripple Creek BBQ.
Heath Askew, the sales manager for Water’s Edge Ranch, was particularly happy with the interest in this weekend’s events. Aside form the great turnout, Heath mentioned that, “It was really exciting to see couples find their future home sites and make their dreams come true.” Concerning the event as a whole, he went on to say, “It has been a very successful year here at Water’s Edge Ranch. We are extremely joyful with the owners that we have so far at this ranch. The year was topped off by this birthday celebration. I am looking forward to meeting the families that get the opportunity to come enjoy this ranch as much as we do.”
Texas Land & Lakes has special events like this one and different special offers continuously. Along with the first year anniversary weekend, they had special pricing in which they paid the first year’s payments – principal and interest! They are now about to launch a new promotion offering a log cabin package from Satterwhite Log Homes with a 3 acre tract. In order to stay on top of these frequently updated promotions, contact the office directly or go to their website at www.texaslandandlakes.com and sign up for their email list.
Texas Land & Lakes is a land company specializing in rural and residential lakefront properties in Texas, at below market prices. For more information, please contact Texas Land & Lakes at:
For a limited time, Tennessee Land & Lakes and L&C Custom Homes have partnered to offer log home packages on large, private, wooded parcels for deep discounts.
Tennessee Land & Lakes is offering a $20,000 dollar proof of purchase voucher to buyers from L&C Custom Homes with the purchase of any lot at either of their waterfront properties. The log home package available from L&C Custom Homes, valued at $30,000, is discounted to $20,000 for those purchasing land from Tennessee Land & Lakes. Combined with the voucher, Tennessee Land & Lakes customers are able to get a $90,000 value for $30,000 less (a $59,900 large private wooded parcel and a $30,000 log package for a combined cost of $59,900).
There are two developments currently available with this log home package, Grande Vista Bay on Watts Bar Lake and Espalier Bay on Lake Chickamauga. Grande Vista Bay is a 1200 acre gated community on a 40,000 acre lake with private wooded, water view and waterfront parcels. Located in Rockwood, TN, Grande Vista Bay is a 40 minute drive from West Knoxville. Espalier Bay is also a gated community on 35,000 acre Lake Chickamauga, offering private wooded, water view and waterfront parcels. Espalier Bay is off of I-75, in Decatur, TN, about an hour from both Knoxville and Chattanooga.
Grande Vista Bay and Espalier Bay are within the Inland Waterway, which allows access to the water from their private boat launches to the Gulf of Mexico. Every owner has direct private deeded access to the water. Both properties also feature a full assortment of amenities: paved roads; underground electric; natural gas; central water and sewer; HDTV broadcast signal; high speed internet service; and a private, modern community center for all owners to enjoy.
Both properties are ready for construction. The current partnership between L&C Custom Homes and Tennessee Land & Lakes is making it easy and affordable to own a home at the lake in Tennessee. Contact Tennessee Land & Lakes to make a priority appointment by phone or on the web.
Offered by WEP Inc., Broker & Tennessee Land & Lakes, LLC.
For more information, contact Tennessee Land & Lakes at:
A few days ago, The New York Times, published an article in their travel section called “Mexico’s New Frontier.” In the article, reporter Jim Atkinson discusses a new development along the Sea of Cortez on the Baja Peninsula.
This new development, Loreto Bay Resort, is part of a trend lately of cooperation between American developers and the Mexican government. As the article states, “There was a time when [owning property in Mexico] was iffy business: public safety and health were questionable; titles to land sometimes unreliable. Now, with Mexico’s leaders placing a premium on attracting foreign buyers, regulation is better and there are reliable agents, title searches and insurance.”
Another planned development in the area is Cimarron Bay Ranch (click here from more information: Mexico Land for Sale), located across the bay on Mexico’s mainland. In contrast to the Loreto Bay homes, which the NY Times reports to range from $350,000 to $1.5 million, Cimarron Bay plans on selling 2 to 10 acre oceanfront and ocean access lots starting at $39,900. Accessibility will not be a problem either with a new coastal highway being built next to the property and a general aviation airport nearby, as well as commercial air service to the Sonoran capital of Hermosillo.
Times may be slow here in the states, but as Loreto Bay and areas like Los Cabos are showing, prices are steadily increasing in Mexico. As “Mexico’s New Frontier” points out, “…with tens of millions of American baby boomers who are expected to retire or become semiretired over the next couple of decades, this just might be the shape of things to come.”
In the article “Housing: Best time to buy in four years” found last week on cnnmoney.com, author Les Christie stated, “Home prices have dropped so quickly and so far that valuations – the difference between what a home should cost and its actual price – are the lowest they’ve been since 2004, according to a report.”
National City Corp’s chief economist, Richard DeKaser added that current affordability is “the best in the past four years” and “Housing valuations are almost back to long-term norms.”
These statements are all based on a survey done by National City Corp. and Global Insight and covered home valuations during the last three months of 2007, meaning that valuations are likely to be even more favorable today.
When looking at specific areas, LA and TX were found to have the best bargains. Click on this link: Land for Sale in Texas, for some properties currently for sale in East Texas.
The indicator mentioned is The National Association of Realtors’ index for pending home sales, and NAR’s chief economist, Lawrence Yun, also mentioned that NAR members are “… telling us there’s been a pickup in shopping activity.” Yun even thinks home sales may climb later this year. In fact the NAR is predicting existing home prices to rise 3.5% in 2009.
Pending home sales were on the rise in certain regions from December to January. The West in particular saw a 13% increase in this time period.
These articles point to one thing, this may be the best time to buy real estate. Homes are at the best value they have been for years, and there seems to be some indication that prices may go up very soon. There is no telling where and when the bottom of the market may be; but one thing is sure, there will be a lot of people waiting too long, missing the boat entirely.
