Land Improvements

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.

Maine Shoreland Zoning Rules 101

Before you purchase that lake, ocean or river front land, home or cabin in Maine, you should know a little about shoreland zoning rules. This includes all area within 250 feet of the normal high water mark of the water feature. Knowing the basic rules will help you better select a property that meets your expectations.

As Mainers, we often take good water quality for granted. It is well protected here, but that is not the case in every state. Recognizing the value of water quality to fish, wildlife and us humans, the state adopted shoreland rules with beginnings in the 1970’s that continue to be updated today. The reasons for mandatory shoreland zoning are many, including such goals as preventing water pollution, protecting wildlife habitat, and conserving the scenic beauty of our special places to name a few.

The rules do depend on where the property is located, either organized or unorganized township. Also, what property type you are going purchase, such as an unimproved waterfront parcel or an existing residential structure. Also, please note that every organized town can have slightly different rules depending on the ordinance they have adopted, but all will comply with the minimum requirements. Check in the code enforcement officer (CEO) of the town to get the local ordinance.

For unimproved lots, here are the basics.

  • Minimum Lot Size – For tidal areas 30,000 square feet ( just less than 7/10 of an acre) For non-tidal areas 40,000 square feet (just over 9/10 of an acre)
  • Minimum Water Frontage – For tidal areas 150 feet For non-tidal areas 200 feet
  • Minimum Lot Width – within 100 feet of the high water mark shall be equal to or greater that the required water frontage.
  • Minimum Set Back for buildings – For great ponds and rivers flowing to great ponds 100 feet from the high water mark. For other water bodies, 75 feet from the normal high water mark.
  • Vegetative Clearings – This is a probably the most misunderstood of all shoreland rules. Review the ordinance for formulas to use prior to any harvesting of trees and/or other vegetation and do consult with the CEO prior to beginning to avoid possible fines and other penalties.

If you are purchasing a non-conforming ( AKA “grandfathered”) structure the rules for additions, expansions and other changes can vary a lot depending on the size, setback, height and other features of the structure. All of these changes will at a minimum require CEO approval, commonly planning board approval.

There are many exceptions to the above. This can be a complex topic, so I have provided a link to the Maine Department of Environmental guidelines here should you need additional information.

Maine Subdivision Rules - Should You Develop Your land?

Maine Subdivision Rules - Should You Develop Your land?

In Maine, there is a difference between a division of land and a subdivision of land. In most municipalities dividing your property into two separate lots requires little or no permitting. However, dividing a property into 3 separate lots within a 5-year period does require approval in most cases, and is the definition of “subdivision” in our state.

Increased Property Value

Why would you want to do a subdivision? Most property investors look at the subdivision process as a way to increase the per acre value of their property. At first the thought of a smaller lot being worth more does not make sense, but consider that by reducing the size of the acreage you bring the gross selling price lower and within the purchasing power of more people. More people competing for a property usually translates to more demand and a higher price.

Higher prices may or may not translate into more profits. Before jumping headfirst into a subdivision some research and planning should be undertaken. Market conditions should be the first consideration. Data such as recent comparable lot sales, how many sales have occurred, lot sizes of successful sales, what is the current supply of lots, absorption rates, and financing availability to name a few. Next what will be the costs of surveying, wetland delineation, engineering, road construction, soil testing and other requirements of permitting? After thorough analysis and due diligence a property owner can decide if the risk is worth the reward to subdivide.

Requirements

Every organized town in Maine may have a slightly different subdivision ordinance. The unorganized territories in Maine have a uniform ordinance with little variation in requirements. Typically, a local planning board will review a proposed subdivision to see if it conforms with the ordinance. The process will consist of several meetings starting with a presentation of a preliminary sketch of the proposal. This is followed up with notifications to the public and nearby property owners of the proposed subdivision and the date of the public meeting to review it.

This next hearing consists of a more formal presentation of a preliminary survey plan of the layout of the proposed lots, roads, easements, slopes, soils etc. Public comment is permitted and heard by the board. After this meeting any changes required by the board need to be addressed and another hearing with a final plan will be scheduled. Assuming no other issues are outstanding, the board will sign the final plan that will be recorded in the county registry of deeds.

Exceptions

There are a number of exceptions to the rule to sell property without the process of subdivision. Gifts to relatives (see definition in statute) may be exempt if the donor has owned the property for at least 5 years and the consideration is less than ½ the current assessed value. Sales to abutting property owners may be exempt from subdivision rules. In unorganized territories, 3 lots can be created in a 5-year period as long as the 3rd lot is retained for forest management purposes. This is often referred to as the ‘2 in 5 Rule.’ There are other exceptions listed in the statute linked above.

Summary

This post is intended to encourage a thoughtful process in land investing and should not be viewed as an endorsement to subdivide your property. In many cases I would advise clients not to.  The above descriptions are a simplification of the process, not a complete outline of all potential requirements of every planning board. You are well advised to consult with experienced professionals like real estate attorneys, surveyors, soil scientist, and land brokers before undertaking the subdivision process.

Maine Current Use Tax Programs

Maine has four current use programs to reduce taxes on land that is used primarily for a specific purpose. The four programs are tree growth, open space, farmland, and working waterfront. The following is a brief explanation of each program with links to guide you to more detailed information.


Tree Growth Tax Law 
The most commonly used current use tax program in Maine is the Tree Growth tax program. It may also be one of the most misunderstood. The basis of the program is to assess land of 10 or more acres based on its productive use as commercial timberland. Growing and harvesting must be the primary use.
During 2017, Maine’s Tree Growth tax program came under the scrutiny of the governor’s office as did most 
property tax reductions. It is believed, and probably rightly so, that a significant percentage of the properties enrolled in this program may not be in compliance with the law. In order to be in compliance, your forest management plan needs to be up to date and implemented. If you have purchased forestland in Maine and you have never talked with a licensed forester you may already be out of compliance. Bulletin 19 on the state website provides information for those already in the program and those considering enrolling. The link below is bulletin 19 
Bulletin 19 

Farmland Tax Law
This tax law requires the land to be used for agricultural or horticultural purposes and must be of 5 or more contiguous acres. The land must earn at least $2,000 gross income per year to 
qualify. The owner must file an income statement with the assessor by April 1 of each fifth year, after qualification, for the previous 5 years income of the owner or lessee.
The assessor can use a number of factors to determine farmland values for current use 
including farmer to farmer sales, soil types, land rents, and others. For additional information on this tax law see Bulletin 20 link

Bulletin 20                                                        

Open Space Tax Law
This program provides for a reduced assessed value based on the property being preserved or 
restricted for a public benefit. Qualifying public benefits include recreation, scenic resources, game management and wildlife habitat. The open space program does not have a minimum 
acreage requirement. In open space the tax assessor will reduce the value by either researching sale data of parcels all or partially in conservation or preservation and computing a fair value, or by applying a percentage reduction based on the public benefit or benefits being applied. The reduction, depending on the benefit, can be as high as 95% of the assessed value. See Bulletin 21 at this link. 

Bulletin 21

Working Waterfront
Land that qualifies for this current use tax treatment is for land on tidal waters or in the 
intertidal zone used at least 50% for access or support of commercial fishing activities.
The assessed value reduction varies from 10%, 20% or 30% depending on the percentage of use and potential deed restrictions for use. See all the details on the state site for Working Waterfront Q&A at: https://www.maine.gov/revenue/forms/property/pubs/workingwaterq&a.htm

Moving Sideways 
If you desire to change the use of your property under any of the first three laws above you can avoid any penalty for that change of use. Property changed from farmland to open space, farmland to tree growth, open space to farmland, or open space to tree growth will not be 
penalized if a parcel also meets eligibility requirements of the new classification. 
 

         

Permaculture - What Is It?

More and more people are awakening to the realization that the current system of living and providing food for our population is a tenuous and fragile system.  The demise of honey bee populations may be a visible sign of how our current monoculture mega farming techniques are not the best methods for a healthy eco system.  They are inherently dependent on large applications of petro-chemicals to produce yields of crops that are shipped vast distances on trucks to consumers that are thousands of miles away from their food source.  Bees are trucked thousands of miles and then placed in a virtual food desert where all they see for miles and miles is 1 type of plant on which to gather nectar and pollen.  Imagine how healthy you would be eating only oatmeal 3 times a day, for a month or more.  Regular yes, healthy no!

Permaculture is a growing trend not only herein the U.S., but worldwide.  Pioneers in this field like Geoff Lawton of Australia have been instrumental in teaching and developing and applying the developing principles of Permaculture throughout the world.  Through applications of reshaping and forming the land to enhance and utilize its contours, you can develop a method of conserving and utilizing water that eliminated the needs to use pumps for irrigation.  Permaculture strives to mimic the diversity found in a forest, where man is not required to annually apply fertilizer and spray trees with pesticides in order for a forest to grow.  Left to its own designs a forest will grow without man doing anything.

Permaculture farming strives to develop a sustainable and robust food forest system that once established will grow and improve without man continually applying petroleum based fertilizers or pesticides.  The living food forest will, over time, improve the water table, improve the soil fertility and allow a diverse array of food crops to grow together better and healthier than they do individually.  One of the tenants of Permaculture that really appeals to me is the fact that during feudal times, the only people that had lawns were the monarchs.  Peasants farmed what land they had to feed themselves.  Monarchs as an outward display of opulence could afford to use farmland for nothing more than growing grass.  On a small scale worldwide people are turning back and front yards from barren lawns to nutrient rich food forests where they can pick fresh fruits, nuts, berries and more and eat it right off the vine in their own yards, and never have to cut the grass again.

There are many good books on the subject of Permaculture.  I've read Practical Permaculture by Jessi Bloom & Dave Boehnlein as well as The Resilient Farm and Homestead by Ben Falk.  Ben's book details his homestead from the land purchase to building the home on a plot of undesirable land in Vermont.   He through the application of Permaculture techniques is even able to grow rice on his property in Vermont for his families use.  There are numerous websites and YouTube videos on the topic; in short Permaculture creates a more sustainable food source and lifestyle on our planet.  What's not to like about that?

Comments

  1. Rick Theriault on

    Colleen thank-you for your words regarding my recent post on the subject of permaculture. If you take a look at my bio on the United Country Lifestyle Properties of Maine site, http://www.mcphailrealty.com/meetourteam.htm you will see that my interest pretty closely mirror yours. Maine has what you are looking for. Our agency usually has several properties that would appeal to a person looking for sustainable living. Leaving the world a little better off by what we do as stewards of the land is something we all should strive to do. Feel free to contact me any time at the email address listed.

    On The Trail to Increasing Your Land Value

    There is something special about a walk in the woods. Inspecting the tracks of forest animals, listening to the distant "wack-wack-wack" of the pileated woodpecker, watching a busy beaver putting the finishing touches on her dam, these and many other woodsy events are just a few reasons why we own land. To better care for and use our property we enjoy creating and improving multi-use trails. Building trails improves our outdoor experience, while at the same time increases the lands value.

    Before starting the physical work of trail building take some time to mentally plan the construction. What are the intended uses of the trail? Is it for accessing a location such as a hunting stand or scenic place, hiking and cross country skiing? Do you intend to have vehicles on it like ATV's, snowmobiles,  tractors, mountain bikes or others? How much traffic will your trail support? Asking yourself these and other questions will help you design a trail that meets your goals and will save you time and money.

    Google Earth and the Maine office of GIS provide free solutions which can be used to plan and map your trail system. If you are not familiar with these programs see our post on using Google Earth. for some basic information. The topographic overlay from the Maine office of GIS in conjunction with Google Earth is especially useful.

    Once you decide for what purpose and where you want the trail now is the time to get out on your property and scout out the best route. Online mapping got you a good start but it won't show you all the variations in the land like micro elevation changes or the best place to cross a creek for examples. Priorities when choosing the best route should include minimizing soil disturbance, protecting riparian areas and require a minimal amount of future trail maintenance. When done well trails enhance the recreational and economic use of the land today and for years to come.

    You will need a few tools to create your trail. The following will get you started and may be all or more than you need.

    • Flagging Tape
    • Lopping Shears
    • Rake
    • Shovel
    • Lightweight Chainsaw
    • Brush Saw
    • Lawnmower

    If I am out alone clearing trails to be used primarily for hiking, a good pair of shears and safety glasses are what I will bring. When making larger or wider trails power equipment is a big time and back saver. If you plan to use power equipment be sure to get good safety gear to protect yourself from injury.

    Building trails is hard but rewarding work. So get out there and enjoy your land.

    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.

     

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    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.

     

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    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.

    SWOAM Turns 40

    On Wednesday Peter and I attended the annual meeting of the Small Woodlands Owners Association of Maine. This year marks the 40th year for the non-profit group. SWOAM was formed in 1975 by a group of non-industrial forestland owners interested in sharing knowledge about how to better manage their private woodlands to improve tree quality, wildlife habitat and other topics important to Maine land owners.

    This year's annual meeting featured an energetic Col. Rick LaFlamme of the Maine Warden Service explaining the New Landowner Relations Program being implemented by his department. The Warden Service, under Rick's leadership, promises to proactively assist Maine's landowners to deal with litter, property damage and the lack of respect shown by the few who don't appreciate the open access offered by many of our state's private land owners.

    Maine author and outdoor expert George Smith spoke about his new book "A Life Lived Outdoors" and his good humor and obvious passion for Maine entertained those attending.

    Hemant Pendse, University of Maine professor and Director of the Forest Bioproducts Research Institute gave a fascinating talk on new uses for wood including cross laminated wood, uses for nano cellulose, making liquid fuels such as jet fuel from wood and the potential for markets for wood derived sugars. The work of Dr. Pendse and others from the University of Maine, in collaboration with other colleges around the country and private businesses promises to keep Maine and the US the leaders in innovation for new forest products.

    The after lunch session included Maine humorist Gary Crocker who kept the group laughing preventing that after meal downer. Following Gary, a panel of four discussed the future of Maine lumber and wood using mills in the state. The panel included members from the sawmill industry, paper industry, timberland appraisal and private consultants. Jason Brochu, of Pleasant River Lumber Company discussed the need for Maine forestland owners to produce quality saw logs and Donna Cassese, Managing Director of Wood Resource Strategy at Sappi Fine Paper told us how her mills have stayed profitable with niche products such as dissolving pulp.

    The day was wrapped up with an interesting presentation by forest pathologist Bill Ostrofsky of the Maine Forest Service. Bill talked about well-known pests such as the spruce budworm and emerald ash borer. Bill also told us about a new strain of white pine blister rust fungus and hemlock shoot blight and how to identify these diseases.

    Peter and I have been members of SWOAM for a short time. I can say as a Maine woodland owner you certainly get a good value from membership. The monthly newsletter, annual meeting/learning event, more than 50 workshops per year, legislative updates concerning land ownership and many other benefits more than offset the cost of membership.

    To learn more about SWOAM, check out the website at http://www.swoam.org