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 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.
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.
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.
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 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
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
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.
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
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.
I just attended an educational class on forestry issues taught by State Foresters Terri Coolong and Oliver Markewicz. This informative session covered topics of the Maine Tree Growth Tax Program, Maine Forest Practices Act including liquidation harvest laws, foreign investment in agriculture land rules and other information.
I believe it is a little known fact that the Maine Forest Service can provide free technical information to those who own forestland in Maine or those considering purchasing it. Maine has 10 district foresters who cover our state offering services ranging from educational programs to limited one on one contact with individual owners.
The district forester will help you understand sound forestry practices that when implemented should add long term value to your land investment. A one on one session can give you a better understanding of your land and should help you be more informed when working with an independent forester to formulate a forest management plan. To find the district forester who covers the town your property is located check out the link here to The Maine Forest Service.
Is it time to harvest your timberland in Maine? If so and you do not have the experience, equipment or desire to do it yourself, do you know how to find someone to do the harvesting for you?
Choosing a logger is a very important process in the management of your timber investment. Done properly, harvesting will pay a return on investment with competitive stumpage checks, improve the growth of the remaining trees, protect sensitive areas, provide habitat for game animals, open views and possibly make road improvements. An improper harvest may do just the opposite of the above. So how do you go about finding a logger you ask?
If you have a forest management plan you should start with your Maine professional forester who prepared your plan. He or she should know some reputable loggers who they could refer to you. Once you have a couple of names ask some questions.
- Ask for references from other land owners that the logger has worked for. Call them and ask how the job turned out.
- Ask for their certifications. The better loggers in Maine will have been through the Certified Logging Program (CLP) or the Master Logger Certification (MLC). Both of these credentials show that they have some working knowledge of proper forestry and safety techniques.
- Ask them to show you that they are insured for workers compensation in case of an accident. You do not want an injury on your land to become your problem.
- If you can, visit a couple of their past jobs sites to see how they left the land.
- Once you have decided on a contractor get a signed contract for the job. This will give you and your logger have a clear understanding of how the job will be done and what and when you will be paid for your trees.
If you get an unsolicited offer in the mail or over the phone be cautious. That logger may or may not be good at what they do, to be sure use the above questions.
As always I would recommend that your independent forester be part of the process. Their assistance in the process will most likely pay dividends for the future of your forest.
For more information on timberland see http://investintimberland.com/
We had a successful hunting season in Maine for 2015. Everyone in our hunting party saw deer, had some good naps on stand and just enjoyed being in the Maine woods in Hancock County. In the post you will see a photo of my 10 year old nephew, Gavin, enjoying a nap on stand. Gavin bagged his first turkey in May and bear in October, but the whitetails were intolerant of the snoring sounds coming from his blind.
Throughout this year we worked on clearing new hiking and ATV trails throughout the northwest section of our family woodlot. Along these trails we installed two ladder stands on a ridge of mature maple and pine trees overlooking one of the small babbling brooks that meanders through our land. From our stands we also have a view of Blue Hill Maine and Mount Desert Island and parts of Acadia National Park. Even on the days we don't see deer the views are nice.
The trail work paid off as my brother harvested a nice 8 point buck that dressed out just under 190 pounds. To make the job of getting the deer out of the woods, our neighbor Nick and his 3 year old son Colby drove their ATV out our new trail and drug the deer out for us and even hoisted the animal onto our truck. Thank you Nick!
We have found the deer like to use our new trails along with other game animals. To smooth out some of these trails and remove stumps we plan to have Jeremy Guellette of Ground Perfection Specialists spend a day or two with his grinder cleaning things up for us. The machines you see clearing the sides of I-95 north of Lincoln is Jeremy's company.
Once cleaned up we will seed down the trails and plant some small food plots. Our forester also recommended cutting back the 7-10' poplar in areas. This will cause the poplar to reshoot new seedlings and will be a "natural" food plot.
We enjoy working and improving our woodlot. Owning land in Maine has many benefits but to me one of the tops is the therapy of doing physical labor and discovering new areas of your Maine land and how to best take advantage of the topography and other features.
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.
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.
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.
- older posts
- newer posts