Land! Its The Only Thing That Lasts!

Jan 15th, 2009 – Comment

Hi Lou, Avid listener on AM640 and great website. I came across some large acreage property for cheap (less than $100,000) north of Toronto. I’m wondering if I should take advantage of this once in a lifetime economic recession and purchase it now. I also have the option of planting trees on this property through a government […]


About the Author

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


Read the author's full profile.


Further Research

Read more about Real Estate.


Hi Lou,

Avid listener on AM640 and great website. I came across some large acreage property for cheap (less than $100,000) north of Toronto. I’m wondering if I should take advantage of this once in a lifetime economic recession and purchase it now. I also have the option of planting trees on this property through a government sponsored program.

The Forest For The Trees

The Forest For The Trees

Thirty years from now, wood might be a luxury and it sounds like a good ROI. However, I’m no tree farmer nor do I have the luxury of visiting the property as often as I would like. Its far and a paved road is about 1 km away from the lot but its surrounded by crown land so its not that bad. The tree planting could wait though, but what about acquiring the land. Should I wait? Will the economy tumble more so maybe I can get a better deal (bank loan and lot price)?

Thanks for your time,
Anthony

Hi Anthony.

The way to leverage land as an asset is to determine its development potential. Can you build homes or commercial properties on the land? What is the zoning on the land and can you get a variance to exploit the full potential of the asset.

If you are strictly looking at the land as a tree farm operation then you want to consult with an expert in Silva culture to make sure you are planting trees that can survive and thrive in the climate where the land is located. One thing to think about are Christmas trees.

Christmas trees are a high value product and after your first planting matures should produce an annual cash flow. You could plant some Christmas trees and some ornamental species to sell into the gardening sector. You should also research the outfit in Niagara that has developed species that mature quickly. Here’s the link.

http://www.gardenbanter.co.uk/showthread.php?t=85032

Another thing you need to do is consult with a Chartered Accountant who can advise you on how to manage the asset for tax purposes. From my knowledge you can not deduct the interest paid to hold raw land but if it is the base of a business operation it is treated differently.

Finally the purchase of an asset with a 30 year investment horizon will cover a multitude of sins; even paying too much. In today’s environment I would expect that you can negotiate price given that most vendors are motivated in this no bid market. You have to conduct your due diligence to make sure that the $100,000 price is a value given the historical price of land in the area and comparable sales.

The thing about real estate is that you had better really like what you buy because you might end up owning it a lot longer than you ever dreamed!

Happy Capitalism!

Categories: Real Estate
Content © Relentless Economics - Charts courtesy Stockcharts.com - Employees Entrance - Optimization Media