The Recreational Land Investment
While many investors choose to invest in ranches or unimproved ground, it is usually done based on the potential return on investment, whether it be a short-term profit or a long-term goal. Typically, these properties are purchased and operated on a commercial level for cattle, sheep, farming, etc. One of the newer and most popular types of offerings to hit the marketplace in the past few years is the recreational ranch.
There seem to be multiple factors giving rise to the popularity of the recreational ranch. Below are a few factors I believe have contributed.
Historically, real estate has proven to be a solid investment. True, the real estate market sees its peaks and valleys, but history has shown us the next low is never as bad as the last, and the next peak is always higher than the previous, making an informed land purchase one of the safest and most stable investments one can make.
Retirement for Americans has changed drastically over the last 40 years. The current average retirement age is 59, with 63% of Americans retiring between 57 and 66. With Americans retiring at an earlier age, many find that they desire a much more active retirement lifestyle. Many are venturing out with their extended families to enjoy the great outdoors: hiking, cycling, fishing, hunting, camping, etc.
A tangible asset. Unlike most assets, a recreational ranch is something you can touch and use. Something one can enjoy while your property is accruing equity over the years. I believe one will soon see “Legacy Recreational Ranch” as a title on the ranch market as these Recreational Ranches pass from one generation to the next. Children will grow up spending the summers or vacations on the ranch, and soon, it will be their children’s children begging to go to grandpa and grandma’s ranch.
A way of life. More Americans are gravitating to a simpler way of life, with wide-open spaces, the beauty of mother nature, and the peace and quiet of rural America.
There are many things to consider about the property itself, type, location, size, amount of investment, improved or unimproved, remote, whether this will be your permanent residence or a second home? All of these things will play a part in your investment, and all will need further investigation on your part to understand what and where you want to purchase. The Northwest is undoubtedly one of America’s greatest destinations when it comes to these types of properties, Wyoming, Montana, Idaho, Colorado, Oregon, and South Dakota, to name a few.
Each of these states has different laws and tax structures that you may find appealing or not, and some homework on your part will go a long way to narrow down what state you would prefer in the end. Wyoming, for example, is ranked as one of the most tax-friendly states in America.
If the acquisition is to be a second home and you were to keep your residency in another state, you will find that owning property in your chosen state for your recreational ranch may not give you the benefits you desire. Take hunting, for example; many states look at nonresident landowners as just that, nonresidents. Even while owning a ranch, one would still have to apply as a nonresident for hunting permits. In other states such as Wyoming, a nonresident can receive Landowner hunting permits for elk, deer, and antelope if the property qualifies. Of course, if you decide to become a resident, then this is a non-factor.
THE RANCH CHECKLIST
ACCESS Is the access seasonal or year-round? Is it maintained, and by whom?
ELECTRICITY If you are looking at the unimproved ground, is there power on the property or nearby? If it is not on the property, can you obtain the needed easements to get power to the property? What would be the cost of bringing the power to the property?
WATER RIGHTS This can be a very detailed and time-consuming search. Some water rights date back to the early to mid-1800s. Just because there is a live stream flowing across the property does not mean that you can drop a pump in it and irrigate the land.
LEASED LAND Are there any current grazing leases that are associated with the ranch? If so, how large are they? How much is the yearly cost? And what are the guidelines of the lease.
DON’T OVERBUILD Always keep in mind that more than likely, the ranch will one day sell, because things happen and times change. Overbuilding for an area can be the kiss of death for a property. Most Buyers are willing to remove or add to modest improvements but balk at paying for someone’s dream mansion only to build something that fits their needs.
INCOME SOURCE One thing that will benefit the recreational ranch buyer is finding a property with income potential. A grazing lease, hunting lease, or timber harvest can relieve some of the yearly costs of operating the ranch. Another source to consider is a conservation easement. Not all properties will qualify, but if the property were to interest a conservation group, one could realize a substantial return of their initial investment and protect the property as it is forever.
At Fay Ranches, we pride ourselves on being able to help you navigate all of these questions and any others you might have. With agents spread across the country, we are strategically located to help you in whatever state you decide to buy property and look forward to doing so if the need should arise.
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