Saturday, January 7, 2017

Buying Land For Investment

All the sudden you have a windfall of cash and someone tells you "put some of that into land!" Great, where? Why? How?

Those familiar with 1031TFE sales/purchases know the value of rolling these purchases forward. Check with your tax accountant for the extremely valuable investment opportunity here. Basically, you sell an investment property and very quickly invest in another property using the proceeds from your sale. Now that gain is basically deferred.

But what if you have a long time horizon. What are the considerations you should have on buying an investment property? Let's look at raw land. Random purchases of raw land don't work out well a lot of times. Generally speaking, you would expect raw land to appreciate about the rate of inflation, but it doesn't always work out that way - in both directions. Are you prone to win with lottery tickets? Then the random approach may well work for you when the DOT decides that new bypass needs to go through or alongside that random purchase giving you valuable commercial frontage property.

The better approach is to go to your local DOT office and see what is in their 10 year or 20 year plan. It may help you decide where you want to invest on a tract of land! Check with your local county and city officials as well. Often there are plans for communities going out 10-20 years or more that reach well beyond city limits but may affect your future plans.

What about taxes? Consider checking into conservation tax use reductions on your land. If it is a 10 year hold on your own plans anyway, why not use this? It can save you tens of thousands of dollars in taxes -and all you have to do is NOTHING! Really, it encourages those people to do absolutely nothing to their land for 10 or more years and you get a tax advantage for doing so.

But taxes should be a real consideration in making those purchases. Can you afford that annual tax bill? Look at the information available from the County you are buying from. It is free and gives you a lot of information.

Insurance is something to consider particularly if there are any structures on the property. Liability insurance is a good idea as well...even if someone is trespassing, if you have someone get hurt on your land, you want to be covered. Another good reason for putting this investment in an LLC to protect you from similar liability.

Did you know you can sell the timber off your property - even before it has grown to the size needed for timber? Sure, you won't get top dollar - but if you need cash today and don't really care if they cut the land 5 years from now - go for it - but keep in mind if you put it in a timber conservation program beforehand!

Call a Realtor that deals in land for investment. That is really key as they not only will be aware of good deals but they can walk you through the other aspects of your investment.

Sunday, January 1, 2017

Buying or Selling a North Georgia Poultry Farm

If you are considering buying land to build - or buying a poultry farm to get into the poultry business, the first step is to have your head examined. Make sure you check in with any psychiatrist who can diagnose your lunacy! But then again, if you get past that - and you still want in, let's take a look at some big considerations.

The biggest single consideration before getting into the production side of the poultry industry is knowing you are confirmed to have a "contract" for a company to be a grower or producer. Without an actual letter from that production company, DON'T take the next step! Does it matter which production company - oh hell yes! But how do you know? You probably need to do some research.

Back to the beginning. You think you may be interested in growing chickens for either additional income or a full-time job. If the closest you have never been to a farm before, you may want to ask permission from a poultry farmer to visit their farm. That would be the first step. Then, if they agree and the company they grow for allows it, learn what "biosecurity" means - and practice it! This is extremely important! To spread some of the worst disease agents from one farm to another requires about 1/2 the volume of a sweetener pack for your coffee in contaminated manure total. So now you are in a vehicle that has not been on another poultry farm, the tires are washed down and you are wearing clean fresh clothes. Your boots are clean and you can wash them down with a powerful iodine solution that kills everything when you get out of your vehicle. Again, with permission all-around, you meet your farmer where they tell you to and they may have you ride in their vehicle to the poultry house.

Keep in mind, you are learning as you go - this is exactly how you will need to handle anyone who visits your farm when you build it! The farmer will rattle the door if the chickens are a couple of weeks old or older...listen to them scatter. With a house 54X500, tens of thousands of growing chickens are inside. They eat, sleep, drink and poop in there. The white stuff, on top of a squirt of chicken poop, do you know what that is? More chicken poop! Actually, that is the concentrated part with higher urates. It all stinks - excuse me - smells like money - but you may find out something right now - you may be allergic to all the chicken dander floating around, or the ammonia may burn your eyes and nose.

Even in a well-managed poultry farm, some small percentage of chickens die. So look around, are you going to be sick picking up dead chickens as you walk through the houses several times a day to be sure everything is working - feeders, drinkers, lights, fans - and think if you will be mechanically able to repair these products. It gets expensive if you are always having to pay someone else to do that work.

Ask the farmer what he does when the chickens get old enough to move out. There will be caked litter where any water overflowed accidentally or other reasons some of the litter must be removed. Ask what a stack-house is, and an environmental plan for spreading manure. Ask about water demands, what is better propane or natural gas, for value over time. Ask anything you can come up with because you are learning! A good farmer normally will share if you are nice and respectful and really are trying to learn.

Now that you have seen what actually happens on a poultry farm, and you have been psychologically evaluated, and you still want to go through with it, have you put a pencil to paper to see if you can afford it? Sure, land can be had from $1,200-5,000 an acre across Northeast Georgia if you have a good realtor looking for you. But not all land works - and it is always a good idea to be closer in than further out. Fuel costs can cut down on your desirability for that second flock of chickens. $300,000 is a lot of money, I don't care who you are. First-time farmers can get financing with that special letter, but once you do - can you make the numbers work? Can you get a better return on other investment? Are you employing family members and buying them a job? I get that - but people sometimes aren't exactly tickled about this kind of work. Do you have a back-up plan?

What is the difference to you between buying an operating farm instead of building new? Well, cost is one and wear/tear is the other. If you are building new, warranties are involved for some period. You are also a new grower and will be on the more competitive grow-out list. Used equipment is like any used is more prone to break, may require updating by the contracting company to go forward, and may be very expensive to upgrade. That may be why the grower is selling. The real important key for you here - make sure you have that contract transfer in hand before you commit to the land purchase, no question!

Some very important key facts:

The poultry processor-farmer relationship is extensively regulated by federal law. For example, by law growers are entitled to:
  • A written copy of their contract with the poultry company.
  • Information detailing how much they are paid.
  • Information explaining how a contract can be cancelled.
  • Right to a 90 day written notice of the processor’s intention to terminate the contract.
  • Right to terminate the contract with the processor by giving a 90 day written notice.
  • Right to discuss their contract with outside parties.
  • Right to join an association of growers.

I sell land for new houses - I sell farms already under contract with poultry companies - so if you are in Northeast Georgia and need a professional to assist you, please don't hesitate to call. I work with Wayne Farms, Fieldale, Harrison Poultry, Pilgrims (Athens and Gainesville), Cobb Breeders, and a few other companies for specialty needs. I started out 38 years ago as a broiler supervisor for what was then Country Pride Foods, Ltd. So if I can help - I will! 404-316-7821

Monday, November 14, 2016

We Are Not There Yet - But It IS Coming!

The third quarter of 2016 has been a good one. The fourth quarter could be a blow-out good one! We will see. The biggest factors - the presidential race is finally over and a winner has been chosen. That by itself with no indication as to which one was the victor would give solace to any investor - stability will be coming. Investors like stability - you can plan beyond tomorrow and that is a good thing. The University of Georgia beating 8th ranked Auburn for their 4th SEC win and securing a bowl bid - well that is just more icing on the cake showing planning and stability for 2017!

Trump won, and nobody saw it coming - except 75% of the American people. The keys President-elect Trump has in his platform always included lower corporate taxes - investment encouraging tax positions. So guess what - if you haven't already bought that property, it is time to get off the grass and buy! When buying gets competitive prices rock upward quickly as there will only be a limited amount of quality dirt available for you to buy. Growth is happening NOW!

As an astute investor, there are always your own guides as to what to buy in hopes of a reasonable return on investment. Look no further than our own Federal government. Georgia is a good example - but don't try to jump in where it is obvious, you are already behind the times. Look beyond the obvious. Savannah is getting $650,000,000 to improve the harbor there. When they are finished, more and larger ships carrying more and more freight will be able to enter and unload in Savannah. Savannah will be 100% competitive with other Southeastern ports - Charleston and Jacksonville for example. What is another advantage will Savannah have?

Charleston brings in cargo offloading to be shipped up I-95 and I-26 and from I-26 to I-77 or I-81. Columbia, Greenville-Spartanburg, Charlotte, Asheville, all can benefit from shipments right from the port. Ask Boeing, BMW, Michelin if having a thriving port is important. But those companies have done something else in South Carolina - the lobbied for and received inland ports. Places that count as a point of entry for goods as if they were just off-loaded from the boat - and these are in Greer, Anderson, along I-85 in the upstate taking pressure off the roads.

Jacksonville - yes they too have I-95 all the way down and across the I-4 corridor where other goods are coming in from Tampa. But I-95 goes to I-10 and you can reach back across the state to compete with goods coming from Mobile in Alabama.

Savannah's infrastructure is just maturing. Guess who would be a perfect candidate for an inland rail system? Maybe in a rural setting like Franklin County, Georgia with I-85 running right through - servicing back to Atlanta and Mercedes or North to BMW. Or maybe just up Hwy 17 to US 441 - the heaviest traveled non-restricted interstate in the East. Now you can reach Knoxville, Chattanooga, and beyond, all from Savannah. Boy, if there were just an inland port in Lavonia, Georgia...oh, full disclosure, I do have some listings for you on or off the rail just off I-85 on the 4-lane Hwy 17. Just call. Ed

Tuesday, October 25, 2016

Who is Buying Now

If all politics is local it must be closely related to real estate - in particular commercial real estate! Who is buying and what they are buying is so local it is almost impossible to discuss legitimately beyond a certain area - unless you have the numbers. The numbers are the most important deciding factor for purchasing and many sellers do not understand that and just make assumptions based on old data or prices they could have gotten 10 years ago. What a mistake!

Which numbers, you may ask. Good question as it matters again, locally. That is where a real commercial agent makes a difference for you. They may or may not be CCIM certified and registered with all the expensive support groups, or not. If they are professional and informed they may be more valuable to you as a buyer than someone who just touts associations much like someone always name-dropping is supposed to impress you. Let's take a look at what someone should know about in your area depending on what it is you are considering purchasing and why.

1. Employment. If you are evaluating a number of locations for manufacturing, fast food, distribution, anything that requires employees we cannot just assume "build it and they will come." I live in an area where unemployment is at or about 5%. Recently Amazon announced hiring 500 people for distribution jobs. Soon after another larger manufacturer in the area announced adding 650 great production jobs. The hospital opened another huge location (the largest employer in the county) and 4 more smaller companies announced hiring. No people available for the jobs!

2. Housing. Take the above scenario then add this little tidbit in. Most of the people who will be taking the jobs that have been offered will want to rent for $800-$1200/month. If they are buying something it will be in the $150-250,000 range. We don't have any inventory of those products in this area - and since 2008 80% of the development companies that would have built those homes are no longer around - they have taken jobs somewhere else or even in a new industry. So where will we put them?

3. Training. Our local technical college provides something called Fast Start for employers moving into the area. Can you imagine the value to an employer to have someone very familiar with all the processes needed they can hire and start working on day one? Yes they pay for this service, but it doesn't negatively impact production - that is all done in the classroom.

4. Taxes. Here is a number everyone considers and few try to do anything about. Your agent should be educated enough to know who he can call, ask, beg, provide information for to impact what your taxes will be in the next 10 years if you bring those manufacturing or distribution jobs to this market. If not, find another agent.

5. Water. We aren't just talking EPA or state environmental agents - not just considering if you are going to leak something into the water but if you need water for your business. I have seen numbers for getting tied in to local water and sewer for some manufacturers running as high nearly to the cost of the land itself! Ridiculous you say? Nope, real. One small operator putting in a car wash paid $100,000 for the 1.5 acres on a major 4-lane. The initial cost from the county for the water/sewer service connection was proposed $160,000. They worked on it with their agent and the county and got it down to $80,000. Much worse in some instances with large water users in the food production business.

6. Access to Distribution. Many state highway transportation departments are finally getting some funding and are spending money - and they will spend it when future tax dollars are at stake. Make this point locally and get some help getting your products over to the 4-lane (12 lane) much more efficiently and safely.

7. Relative Cost of Land. If you can buy 1 block off the interstate for half the cost, is it worth it? If you can buy 40 miles further away from downtown metropolis for half the cost, is it worth it? Or maybe not half - but at what price is it worth it? Congestion, safety, speed of delivery, not all products go into town but does more than half go out of town? If you look at a major city, pick any major city. Is there an area that isn't as appealing regarding crime? Is there an area of town that is blighted? If you move into that area who is to say you can entice enough good workers to come there and feel comfortable changing shifts at 1 a.m.? But you save big bucks buying that piece of crap land, and it was encouraged by the city counsel, right? Do what is right for your workers too.

Just some thoughts about numbers not everyone considers. Please leave comments on some you have experienced as well.