Buyers

Market Trends and Predictions 2019

 

I am writing this post from the Realtors Land Institute National Land Conference in Albuquerque NM. This annual conference is attended by about 500 of the top land agents across America.  During the three-day conference we network with other land professionals and attend lectures by national economists, political analysts, scientists and other experts speaking on a wide array of topics related to land use and sales.

Economist Dr. Mark Dotzour shared his opinion that the US economy will continue to do well in the coming year. His analysis of current trends and historical data do not point towards a looming recession, as some of the national media have been touting. His advice to shut off your CNN and Fox News feed, which he feels is pure propaganda, was well received by attendees. Indicators such as a consumer confidence index at an 18-year high, a 3.5% wage increase nationwide in 2018, over 7 million open jobs in the US, low oil prices and low interest rates should keep the national land market up for 2019. Expect interest rates to creep up a little bit this year. The fed will look to make some room to drop rates when the next recession comes. At the current rates there is not much room to drop

A land use gaining momentum in the western and southeastern US, which I believe will become a larger niche market in Maine, is “glamping”. Glamping is roughly defined as glamourous camping utilizing extravagant canvas tents, tree houses, and other unique structures. Cost per night stays range from $100 to more than $300. I spoke to several western ALC’s whose clients have purchased property to develop this niche business. Be careful investing in this in heavily regulated areas of the state, Colorado towns have started to zone the use out as undesirable.

By 2020 the millennials will become the nation’s largest demographic. Many in this group are saddled with a lot of debt and are still living at home, however, about 19% of them live in their own home. Millennials are beginning to consider land as an investment that doubles for recreation. I have personally sold land in the past year to this group. They do not have the knowledge about land investing that was more common in Gen Xers passed on by their baby boomer parents, but they are intelligent buyers eager to learn more about the investment side of land. Expect to see more Maine land purchased by this group in 2019.

The hot topic in land this year is industrial hemp because the new farm bill legalized the growing of cannabis plants containing less than .3% THC. This level is where the federal governments differentiates between marijuana and hemp. CBD oil derived from hemp is the most profitable product to date. CDB oil has not been approved by the FDA, however consumers believe it relieves a host of ailments, including insomnia, anxiety, chronic pain and post-traumatic stress disorder.

Agricultural economist Dr. Terry Barr, spoke about a wide variety of topics. Top of his list is China’s slowing growth to about 6%. Overall worldwide growth rates are also slowing, with most increases in growth now coming from unadvanced countries. A strengthening US dollar taking buying power away from other countries will mean that US commodities will not do as well. He expects that US economy to grow more moderately than it has historically. New housing is being built strictly on demand as most spec builders are gone after the last big recession. He expects that residential housing markets will remain steady as they go.

Despite predictions of slowing world growth, at our brokerage we have seen an increase in the number of requests for winter land showings and contracts written over the previous winter. Overall Maine land sales have slowed a little but most of that I believe is due to overall lower inventories of parcels. The hunting and recreational market is strong. We have many buyers looking for cabins and homes on 40+ acres. There has also been a high demand for agricultural properties. Timberland interest has also picked up. If you are considering a sale of your land give us a call to see what the current market values are in your area.

Tired of paying Taxes? Try a Like-Kind Exchange

Death and taxes. Neither can be avoided. However, with some clean living, careful choices, and a little luck the former can be delayed. So can the capital gains tax on the sale of your real estate, which happily only requires some planning.

The tool to make this delay of tax is known as a Like-Kind Exchange, often referred to as a 1031 exchange, from the IRS code of that same number. As of January 2018, this only pertains to real property used productively in business or held for investment and not personal property such as equipment, vehicles, and other such things.

What is a like-kind exchange? Simply put, it is exchanging one property, held for productive use in a trade or business or held for investment, for another property for those same purposes. What it is not? It cannot be used for delaying taxes on real estate which is held primarily for sale, often referred to as dealer property, where it is your business to buy and sell real estate for profit. This will likely be taxed as ordinary income.

Pros and Cons – The benefits of using a like-kind exchange are pretty obvious if growing your real estate investment net worth is your primary goal. Reinvesting equity gain which would otherwise be paid to Uncle Sam in capital gains tax, may net a better return on investment. The downside to the exchange can be the lack of liquidity of real estate in general and less diversification of investments. As an example, if a great stock opportunity became available to you, the equity from the property sale could not be used tax deferred to purchase it.

Is it complicated you ask? We are talking about the IRS, so of course it is. Nothing worthwhile ever comes easy. There are several types of exchanges and rules such as time to complete the exchange, naming of properties to exchange into, and not directly receiving the proceeds from the sale of the relinquished property, plus many other potential concerns. The process involved in an exchange can take up many chapters in how-to books, so I will not cover all the details here. The good news is, if you are interested in an exchange, there are professionals out there, such as Qualified Intermediary (QI), CPAs, real estate brokers, and attorneys that can guide you through the process.

If you think that the like-kind exchange is a possible route that you may take, plan it from the day you put your property on the market. Engage the appropriate professionals that are required to help you. Be sure you inform the buyer of your property about your intentions to exchange in both the property disclosure and purchase and sale agreement. This is not necessarily required but certainly will make for a smoother closing.

If you need more information, here are some links to the IRS website and a QI and attorney we have used.

Rudman and Winchell Asset Preservation Inc. IRS Guidelines IRS Form 8824

 

Purchasing Land By Soil Type – Understanding Soil Surveys

When you are in the market to purchase land one important consideration is soil quality.  Your soil considerations should be based on the intended use for the land. Do you want to grow crops, graze animals, manage timber, provide recreation opportunities or conserve wildlife, wetlands and other sensitive features? The higher the soil quality the better crops and trees will grow. These will be better drained sites for constructing homes and cabins as well.

The U.S. Natural Resource Conservation Service (NRCS) has provided a plethora of information online at Web Soil Survey. The online data is complex. Some soil knowledge or basic mapping skills are necessary to navigate this site. We, at United Country Lifestyle Properties of Maine, have made this process easier for our customers and clients through the use of mapping software that simplifies the NRCS data into an easy to understand soil report.

Soil Types

NRCS has identified more than 70,000 soil types in the United States.   Maine has soil types such as Monarda, Dixmont, Howland, Thorndike, Bangor and many others. The types or series of soils will be abbreviated on maps and reports such as Mo for Monarda or Ba for Bangor. Soils are given compound names such as Bangor silt loam. The first part of the name, Bangor, refers to the soil type. The second part, in this case silt loam, refers to the structural texture of the soil. You can find a soil triangle like the one below online to help determine the texture. I’m not going to discuss the various simple to complex testing methods that can be done for soil texture, you can Google search this topic and find a number of articles and videos showing these methods.  Here is a link to a simple jar method. https://hgic.clemson.edu/factsheet/soil-texture-analysis-the-jar-test/  

Capability Classes

Soil types are assigned classes from I to VIII based on their suitability for agriculture. They are also assigned subclasses based on their limitations of e,w,s, and c which stand for erosion, water, shallow or droughty and cold climate.

Capability Classes I – VIII with I being most desirable. Classes I-IV will support most types of cultivation and V-VII do not support cultivation but can accommodate forestry and grazing. Class VIII land does not support cultivation, grazing or timber production and includes cliff faces and other rock outcrops, beaches, river and creek beds.

 

Understanding Soil Code

Looking at a soil type map for the first time is Greek to most people. But with use of the NRCS Websoil Survey or a mapping platform such as Mapright, these codes will become easy to use. So, the next time you see BaC 3e, you can refer to the capability view and know that this is Bangor Silt Loam with 8-15% slopes and the limiting factor to its agriculture productivity is its propensity for erosion. It can be used for growing crops as long as a lot of conservation measures are used. It probably is better suited to grazing and would certainly grow trees very well.

While doing due diligence in the review of a specific property, don’t eliminate it just because it has class IV – VIII soils, they have value, just not to a farmer. Most of Maine has some limitation to its soils from rocks to slopes to bedrock and so on. Class I and II soils with no limitations are rare and expensive.

Limitations

Like most online data, the US NRCS soil mapping has limitations and localized exceptions will be found on most every site. These reports should not be replaced with an on-ground inspection of individual properties. If soil conditions are critical to your intended use of the property, a soil professional should be consulted.

ARE YOU PREPARED TO BUY MAINE LAND

Are you planning on buying a parcel of Maine land this year? If so, you need to know a few things before you start, especially if you are not from here and/or have never purchased land before.

FINANCING

Before you fuel the car or buy the plane ticket, have you considered how you will pay for it? Obviously, if you have cash this item can be checked off your list. If you intend to get a loan to complete the purchase, you should know it is not the same process as getting a home mortgage. Most US banks do not do land loans. So if you planned on using the BIG bank you have a credit card or your home loan with, save yourself a lot of time and money by asking if they will finance raw land. Ask them questions like:

  • What down payment would be required?
  • Is there a limit on how many acres they will accept?
  • Do they do business in Maine?
  • Do they have approved appraisers and title companies in Maine?
  • Is your credit score high enough for their land loan program?

If you find out they will not do the loan, you just saved yourself hundreds of dollars in travel expenses. There are a few solid lenders who finance raw land in Maine. So if you need financing give us a call to get the list. Also, many sellers will consider owner financing their lands.

GREAT EXPECTATIONS

Maybe before calling the lenders, you should ask yourself why are you buying land? What is your intended use of the property? Did you get all the information on your target properties to be sure the ground will meet your needs and desires? For example, if you intend to use the land for raising cattle, is the land zoned for that use? If not, you are going to waste time and money coming to see it. Make a list of your concerns and get the answers before you come, a few example as follows:

  • Is the zoning in line with your intended use?
  • Is the property in a tax program that prohibits your intended use?
  • Are the soils OK for your use?
  • Does the property have utilities to it? If not and you require them, how far and how much to extend them?
  • Does the property have year round access?

CLOTHING AND EQUIPMENT

The next item of preparedness that I nearly always forget to tell my customers before they get here is the appropriate clothing to wear for a visit to Maine. If you are looking at forested land, for example, and are unfamiliar with Maine, the forest here can be very dense and the ground uneven. Here is a checklist of the minimum gear you should have with you when you come.

  • Good pair of boots - waterproof if you have them
  • Sun or safety glasses to protect your eyes from tree branches
  • Layered clothing options for changing weather conditions
  • A waterproof coat

If you are working with one of us to show you the land, the above list will get you by. If you intend to do some exploring on your own, think about the following items:

  • A good compass
  • GPS
  • Maps of the areas of interest
  • Backpack
  • Water bottles
  • Snow shoes in winter

CUSTOMER OR CLIENT

The final question to ask yourself is are you confident enough to represent yourself or should you hire a broker to help you with the process. If you have the time you can do your own research and represent yourself in the process, but if you do not have time a good land broker is worth a look. Maine does require a real estate agent representing a buyer as a client to have a written buyer brokerage agreement, so if you do decide to go this route be sure to carefully review the contract to see what the agent's and your obligations are to each other.

Comments

  1. Allyson Vignola on

    Thanks for this! Can you send me the list of the Maine lenders that you're aware of that will finance a land-only loan? This is an improved lot, so not just raw land. We've found Maine Savings but that's it so far. Thanks for any help!
    • Phil McPhail on

      Please send me your email and which part of Maine you are in. We will send the information directly to you. phil2@lifestylepropertiesme.com
  2. Bill Hardie on

    Can you send me a list of lenders for the Brooksville, ME area? Thanks!
    • Phil McPhail on

      Please send me an email (so I can get yours) and I will send a list to you directly. phil2@lifestylepropertiesme.com

A Maine Tiny House For Sale - It's In The Trees!

Tiny homes are all the rage across the nation. I wonder if this is a trend driven by a desire to simplify our lives? No matter the reason a tiny home certainly has some upsides like reduced ownership cost from heating, electric, maintenance and property taxes.095

For those interested in the tiny home concept, we have a newly listed property in Springfield, Maine you need to see. Not only is this home tiny, but it is built as a tree house. The multi-level home is perfect for a simplified primary residence or the ultimate get-away second home or sporting retreat.

 

The 544 square foot tree house is perched in a pine grove on 23 +/- acres fronting for about 1,000 feet on babbling Wrights Mill Brook. The land for sale with this unique home is a mixture of forestland, fields, apple trees and meadows. The home is located on a secondary road and is the last home on the town maintained section of the road. Privacy should not be a problem here.FB_IMG_1444066599213_resized

 

Springfield is located on the edge of large forestlands with lots of game and within a 10 minute drive to the boat launch of the Grand Lake chain of lakes. The lakes include Junior Lake, Sysladobsis Lake, Scraggly Lake, West Grand Lake as well as other lakes and ponds. For the outdoor enthusiast there is no better location. ATV/Snowmobile trails can be reached from the property.

 

 

Call 800-286-6164 and ask for Traci Gauthier for a chance to see this one of a kind tiny home.

 

 

 

Conservation Vs. Production in an Off-Grid Power System

I've produced most of my homes electricity for several years now.  Seven years ago I installed a 10 Kw Bergey wind turbine and three years ago I added an additional 3000 watt solar array with battery storage and inverters.  At peak production with both devices I am producing 13,000 watts of power on a sunny and windy day.  On a monthly basis I have seen as much as 1200 kilowatt hours of production from my turbine and an additional 360 kilowatt hours of power from my solar array.  The average home uses 600 kilowatt hours of power on a monthly basis, so at times I am able to produce more power at my home than two average homes in the U.S. consume. This production ability came at a pretty steep upfront cost.  I have around $60,000 in my turbine and about $20,000 in my solar array with its associated inverters, batteries and top of pole mount.

 

OLYMPUS DIGITAL CAMERA

3 Kilowatt Solar Array

 

I have read in various places studies showing the costs for energy conservation compared to the costs of energy production.  The number that I have seen is on the order of for every $1.00 spent in conservation, it would take about $8.00 spent to produce that amount of energy.  So what does this have to do in real life when thinking about building an alternative energy system?  Well quite simply the less energy you really need to produce to live comfortably, the smaller the investment you need to make to produce that energy.

A well thought out off-grid home is going to be well insulated as well as well positioned to take advantage of passive solar heating, natural lighting and have efficient electrical appliances and lighting.  The lifestyle of the inhabitants of that home will be different as well.  They will turn off lights when not in the room.  If they watch television, they will turn it off when it is not being watched.  Pretty common sense items you would think, but not in reality.  It is amazing the people that I have had as guests in my home that leave the lights on, leave the television playing and just waste electricity.  I guess they either believe since I produce my own, it is free to waste it.  It just takes a second to turn off appliances not being used, and all that conservation adds up pretty fast when you figure it is an eight to one return.

 

OLYMPUS DIGITAL CAMERA

10 KW Wind Turbine

 

The inhabitants of a well designed off-grid home will most likely heat with wood, cook with propane or natural gas, and use efficient LED lighting in the home.  The electrical appliances will be energy star rated and they will decide what is truly important to them.  The home will probably not have a dishwasher, although it could.  It depends on what they consider necessary for their lifestyle.  I have seen some pretty amazing properties that were built off-grid and produce all their own electricity.  I have also seen some pretty modest homes with modest energy production investments with above average energy consumption as well.  Utilizing a conservationists approach to living your life will yield large dividends in money saved and still living comfortably in an off-grid home.  Decide what is important to you, what you could use less of, what you can get by without entirely and have an appropriately sized system installed for your home.  A good friend of mine with hundreds of off-grid system installations under his belt has stated that he never tells anyone that it can't be done, what he says is "how large is your budget?"  Eight to one adds up pretty fast.

Buying Maine Land With A Self-Directed IRA

If you are like many of our customers concerned with having all of their retirement investments tied to the stock market you may want to look into a self-directed IRA. With a self-directed IRA you will be ready to act when you find that Maine land for sale that you know is a good investment.

What is a self-directed IRA?

The Individual Retirement Account or IRA has been around for many years as an incentive for individuals to save money tax deferred for their retirement. A self-directed IRA is simply an IRA that gives you complete control over what you invest in.

What can you invest in?

Unlike most IRA's offered by banks or custodians the self-directed IRA can be used for nontraditional IRA investments like real estate, notes, precious metals and many others. Maine timberland, farmland, land with development potential, waterfront and more could be a great diversification to you investment portfolio.

Pros

The best benefit of the SDIRA is the ability to have control over what you invest in. No one cares more about your retirement than you do. You can invest in what you know instead of letting others have control of your future. You can partner with friends and others on new investment opportunities. Your investments will grow tax deferred.

Cons

All investments have risk and a self-directed IRA will require you to do your own due diligence to mitigate risk.

Because this type of tax deferred account could have a lot of potential tax advantages for you the IRS has a lot of rules that need to be followed.

Is it right for you?

You will need to decide if the ability to control your own destiny is something you are comfortable doing. If you do not have time for researching your own investments you may want to stick with a traditional IRA. If you are one of a growing number of individuals concerned with the course of traditional banking and investing, the self-directed IRA is worth a look.

 

Realtor Land Institute Conference 2015

This past week Peter McPhail and I attended the Realtor Land Institute National Business Conference in Tucson Arizona. We were among a contingent of United Country Real Estate ALC's and RLI members from Maine to California to attend the conference. The 3 day event featured national expert speakers on the economy, instructors on new real estate training and technologies plus networking opportunities with over 200 of the best land brokers in the country.

 

economist at RLI

Dr. Mark Dotzour Speaking at 2015 RLI Conference

 

The conference opened with Lawrence Yun, The NAR's chief economist, KC Conway Senior VP of Sun Trust Bank and Dr. Mark Dotzour of Texas A&M. The three gave the group their predictions on what we should expect from the economy in 2015. Here are some of their predictions; o The U.S. GDP will underperform again this year staying below the historic norm of 3% growth, while Europe will remain around ZERO. o Interest rates will remain low but will increase slightly midyear. o Farmland prices are expected to fall with lower commodity prices o Foreign investment in US dollar assets will increase o Supply chain will switch from West Coast to the East Coasts more modern and efficient ports o Oil prices should remain low throughout this year, but gas predicted to hit $3 per gallon because of a lack of refining capacity to keep up with demand o None of the three are concerned with inflation with one predicting deflation for 2015 All three economists feel that the recovery is being slowed by the 2010 Dodd/Frank legislation that came in the wake of the banking meltdown of 2008. All agree that the legislation should be loosened to exempt smaller local banks from much of the restrictions intended to keep TOO BIG TO FAIL BANKS in check. Small banks simply can't afford the legal army needed to wade through this complex law. They have become more selective than they want to be in making loans because of fear of the new laws. These banks were not at the core of the financial crisis and most are doing well. Ask your state senators to get behind reforms to Dodd/ Frank which will encourage lending to home builders and new home buyers.

Recreational Land Investment For Sale Somerset County

This newly listed forested lot for sale in Concord Township, Somerset County has all of the components for quality recreation and investment. When buying land many of our customers have a list of similar requirements. Here is a list of the most commonly requested features which this lot enjoys.

  1. Good Access - A parcel of land that you cannot legally get to has reduced value. The savvy buyer will be sure the acreage they are looking for has a good deeded right of way or fronts on a maintained public road. Care should be taken to certify an apparent access is a legal one.
  2. Power - Some customers will consider off grid locations, but the majority of people like the convenience of being on the grid because it is simply cheaper and easier.

     

    DSC_0039

    136 +/- acres Concord Twp - Little Houston Brook Road frontage with electric at street.

     

  3. Dry Land - Maine buyers know that finding a large parcel of property that is completely free of wetland is probably impossible with all the streams, ponds, vernal pools and forested wetlands in our state. They look for a good percentage of dry land with soils that promote the growing of trees and other plants. The dryer the land the more options for building sites and future development there will be.
  4. Water Frontage - Almost every potential buyer either wants to be on or near some kind of water. Man is naturally drawn to wild rivers, streams, lakes and ponds for the recreation, views and resources.

     

    Frontage on Houston Brook in Winter 2015

    Lots of Frontage on Houston Brook

     

    Interior Roads - On larger tracts of land having a road or trail system is a great advantage to better use the land. The best parcels have a road through the property that makes available different building sites and a reduced cost for managing the timber on the property.

  5. Views - It is difficult to put a value on great views, but most customers hope to find them on the parcel they purchase.

     

    Nearby Kennebec River in Bingham Maine

    Nearby Kennebec River in Bingham Maine

     

  6. Nearby Recreation - When buying a property location is a big consideration. For those investing in land for recreation, things like maintained trails for snowmobile, ATV riding and hiking are a big benefit. Nearby waterways for fishing and boating appeal to the outdoor minded buyer. Another important  consideration is the culture in the area. Do the local residents also appreciate the natural environment and are there nearby businesses and services catering to the rec buyer.

     

    DSC_0059

    Nearby Groomed and Maintained Snowmobile Trails

     

  7. Timber - Not all buyers are focused on commercial timber value, but few desire to own a recent clear cut. As an investment, timber has always been a pretty safe bet for the long run. Healthy stands of trees of various ages, quality soils for better growth and the proximity of nearby markets for the harvested timber all will be considered by the educated investor.

If you are reading this and are like many of our other customers looking for the features listed above, this new listing in Concord Township has all of these features. It contains 136 +/- acres of wooded land with frontage on a 4 season road, electric at the street, frontage on a mountain trout stream, some quality trees, interior road and just minutes from the Kennebec River and other recreation. See more details at our LISTINGS or call or email for a complete property information package.