This article is focused more on the buyer who wants land for family recreational purposes and not a timber land investor. Most timberland investors have a very good idea of timber values, proximity to mills, timber growth rates and bare land values.
The first priority is to make a list of the amenities that you want if you could find the perfect property. Do you want a cabin, a fishing lake, a barn, established wildlife plots, etc. Some buyers prefer a “turnkey” family hunting/fishing property but this costs much more than “raw” land. Some buyers have the desire and expertise to construct amenities which takes time but saves a lot of money.
The second priority is to decide how much you want to spend on a property. If you need financing to buy the property you should meet with a lender who specializes in land loans. In Alabama, two of the most aggressive lenders are Alabama Ag Credit and First South Farm Credit. They will ask you for tax returns and a credit report. You may need about 15% – 20% of the estimated purchase price for a down payment. Your lender will be able to tell you in a very short time the loan amount, interest rate, term (number of years) and the monthly payments.
The final thing you need to do to prepare to buy land in Alabama is to find an experienced real estate agent to help you. The term is a Buyer’s Agent and it costs you nothing! Ask your banker, CPA, or friends who have bought or sold land to give you a short list of agents. Then look at their “bio” on their website to see if you feel compatible with any of them. Pick one and call him or her to discuss your property requirements. If they promptly send you some tracts to look at, then they may be a good choice to work with. Hopefully, you can meet him, tour some properties and get comfortable allowing the agent to represent you. When you are ready to buy, your agent can prepare the sale contract and assist you with the details to a successful closing. Please give John Hall and Company a call at 334.270.8400 and speak with one of our experienced sales agents to discuss your perfect property. www.johnhallco.com.
-John E. Hall, Jr. CCIM
Welcome to the John Hall and Company Buying Land in Alabama series. This is part two in the series. Go here to read, part one written by Pete Hall,
Purchasing land can be intimidating and a foreign concept to some. It does not have to be. Having a checklist on steps to take when purchasing a property can insure that you make informed and educated decisions. These decisions can mean the difference in you owning exactly the property you have dreamed of or not being satisfied with your purchase.
I believe there are three main questions a buyer needs to answer or have established when their search for property begins; Budget, use of the property, and preferred location. Honing in on these three questions to begin with can save you from wasting time searching and looking at properties that are not the right fit for you. Take the time in the beginning of the process to establish a budget. Whether that means meeting with financial advisors or exploring your options with financing. In Alabama there are several “land banks” that specialize in financing rural properties and can provide great insight on how to establish a budget in your search for land.
Once a budget is established then you are really able to kick off your search. When speaking with first time land buyers I tend to ask the question “What is your vision or why do you want a piece of rural land?” There is a reason people begin to look for rural land and keying in on what your hobbies are and what you envision yourself using the property for is a good place to start. Once you have the big picture it’s important to start keying in on the attributes the property needs to have. Listing out several attributes a property needs to have is a great place to start. Things such as a creek, pond, cabin, pasture, timber, wildlife food plots, topography, and any other attributes. Once you have your list of attributes then go through and identify which of those are absolute necessities to make up your ideal property. The landscape in Alabama changes dramatically throughout the state. If you’re looking for the property to consist of a cold-water creek with rocky outcroppings then the coastal plains of south Alabama may not be the best place to focus your search.
Preferred location. This is what I consider to be one of the three more important questions to ask yourself. I always suggest to people to be flexible when establishing a preferred location though. There are areas within the states that are like micro markets where land values can be significantly higher! You may have to travel a little bit further to find a better bang for your buck! Sometimes preferred locations and preferred attributes in a property don’t always match up. The landscape in Alabama changes dramatically throughout the state. If you’re looking for the property to consist of a cold-water creek with rocky outcroppings then the coastal plains of south Alabama may not be the best place to focus your search. Figure out where your ideal property would be located and then search outward from there. Preferred property attributes and location may need to be adjusted. It just depends on which is more important to you.
Although the internet is a great tool and can provide more information than we know what to do with I still highly suggest identifying a real estate broker who specializes in land to represent and assist you in searching, viewing, and purchasing a property. They can provide invaluable insight for first time buyers and help avoid mistakes when purchasing a property before it is too late. An active land agent can have an understanding of an area that you may not be familiar with, be up to date on what the market value for a property is, be able to thoroughly and knowledgably show you properties, identify potential problems, ask important questions to the sellers that may otherwise not be understood or revealed, assist in negotiations, and importantly make sure that you are getting a fair deal while not being taken advantage of.
All in all, purchasing a piece of rural land can be a much simpler process than purchasing a home. Many times, it doesn’t consist of all the inspections and reports needed to close as a home would. Once you have developed a budget, identified what attributes a property needs to meet your desires, and generalized a preferred location then the search process can become much more enjoyable. Having a land agent on your side to assist you through the process can result in a land buying process that was enjoyable and stress free. Before you know it, you will be spending time on your own piece of property enjoying it just the way you dreamed of!
There are many ways in which a landowner can get an idea of how much their property is worth. John Hall & Company along with other land brokers can give a landowner their opinion of value simply based off of recent comparable sales in the area. There is also the route of hiring an appraisal company to provide you with a value of your property. The total value for a property can be broken down into sub-categories to come up with the total value. Many recreational and timber properties can be broken down to the “bare land” value, timber value, and value of amenities. In this article I want to share my thoughts on the aesthetic appeal to a property and how it can affect the “bare land” value of your property.
The aesthetic appeal to a property can be the difference in the land selling at $900 an acre for the “bare land” or $1,300 per acre for the “bare land. It is nothing more than the aesthetic appeal but adds value to your property. The location of a property has a lot to do with the “bare land” value of a property but if the property is not maintained or provided some TLC you will not see the same return in value. Aesthetic appeal of land can consist of something as simple as mowing and trimming limbs along a road system. Think of it as vacuuming your home and mowing the yard. If you were trying to sell your house and you had not vacuumed your home or cut the grass in over a year, do you think the potential buyers who come to view the house would even make an offer or if they did do you think they would be willing to pay a premium price? A few other aesthetically pleasing but small costs that can improve the value of your bare land can be planting fruit trees or other mast producing trees around food plots, having a gated entrance to the property, adding culverts to creek crossings, or adding rock to creek crossings to give it a hard bottom. To compare to residential real estate think of this as decorations and furniture to make the home look better.
When buyers are viewing properties, and see that a property needs a lot of upfront work they most of the time discount the price they are willing to pay. This is to adjust for the upfront costs they will need to apply to the property when purchased. The value of the “bare land” in negotiations, although many times not specifically stated, is typically the value that will fluctuate the most. Buyers are willing to pay more for a property that is maintained and accessible over properties that are not. Recreational buyers tend to be willing to pay more for property than timber companies or individuals strictly interested in the timber. Therefore, in order to obtain the best value for your property it may be beneficial to manage your property catered towards recreation. However, this does not mean the timber value is not important because it can be a large portion of the total value of the property.
A maintained property is an aesthetically pleasing property. It is in the best interest of the landowner to keep that in mind if they are looking to obtain the best value possible in a sale. Sometimes landowners do not live nearby, have the time, or have the ability to maintain their property, and in that instance, we suggest leasing the hunting rights out. A hunting lease can be structured so that your roads will be maintained, food plots will be planted, and the property will be accessible.
John Hall & Company would be pleased to assist you with your land needs and would be happy to provide our opinion of value. John Hall & Company has been in the business of selling land since 1987 and we would be love to talk land with you!
Hoke Smith IV