“You can all go to hell…I’m going to Texas” Davy Crockett 1836. It was true back in 1836 and it is true now in 2013! We are not only seeing an increase in residential sales, but in land. Farm land, ranch land, timber land, recreational land or transitional land are all selling.
It is not only Texans buying land or out of state investors buying land but a huge increase in foreign investors buying land.
Foreign investors held an interest in 24.2 million acres of U.S. agricultural land (forest land and farm land) as of December 31, 2010, which is the last reporting date by the USDA Farm Service Agency. With a value of approximately $38,000,000,000.00!
This is an increase of 1,530,652 acres from the February 28, 2010 USDA report, and represents 1.9 percent of all privately held agricultural land in the United States. These and other findings are based on information submitted to the U.S. Department of Agriculture in compliance with the Agricultural Foreign Investment Disclosure Act of 1978. Forest land accounted for 56 percent of all foreign held agricultural acreage, cropland for 17 percent, and pasture and other agricultural land for 27 percent. In Texas, there is approximately 167 million total land area acres. Privately held agricultural land is approximately 153 million acres and of that close to 3 million is foreign held.
Not only have we seen an increase in land sales, but we have witnessed a huge increase in land values. For 2013, the value of cropland in the United States increased 13 percent to $4,000 per acre above 2012, according to a 2013 report from the U.S. Department of Agriculture. This is up from the 2004 price of roughly $1,400 per acre. In southeast Texas this year alone, I have seen close to a 17% increase.
The average Texan may not know these numbers but U.S. investors and foreign investors do! We should remember what Will Rogers said: “Don’t wait to buy land, buy land and wait.”
Agricultural land and timber property has seen the largest increase in value. Agricultural land, mainly because of the increase in commodity prices, continues to be hot. We have seen in the past few year’s record prices in corn, soybeans, grain sorghum, cotton and rice. That brings an excellent return on their investment.
With the steady increase in the price of land and good yearly leases, this is a no brainer for the savvy investor. For the foreign investor, not only is the return on investment (ROI) important but the safety and security of owning U.S. land. Land ownership, in some countries is forbidden or at least an unsafe investment. U.S. land is a safe haven for the foreign investor.
In Texas, and more specifically southeast Texas, we have seen an increase in foreign buyers from numerous countries. Canada, Mexico, China, India, Russia, Iran, Germany and The Netherlands just to name a few. Texas ranks second only to Maine with the most foreign-owned landholdings. The majority of foreign buyers are cash buyers. Therefore, no loan approval and in some cases no appraisal. This makes for an easy, fast and clean closing. We have also seen an increase in the ‘Green Card Through Investment’ program or EB-5. This is a U.S. visa program in which foreigners can gain permanent residence by investing $500,000 in a U.S. project that creates at least 10 jobs. Farm or ranch operations certainly fit this category and foreign investors have been taking advantage of it.
Many foreign investors will utilize the 1031 tax exchange program in which they will sell their US land and reinvest the proceeds in more agricultural land. This keeps land flowing in the market as well as money moving. What you will find with the foreign investor is that, if you do a good job for them and build a relationship, they will stick with you! So look for repeat business.
Texas is for sale folks, and it is selling.
Selling farm and ranch land, whether to foreign buyers or US buyers, is not always easy. Realtors need to be very versed in mineral rights, water rights, easements, etc. In other words, know your business, because they do.
The National Association of REALTORS®, through its REALTOR® Land Institute (RLI) along with the Texas Association of REALTORS®, Texas REALTORS® Land Institute, is your leading source of information on land. The REALTORS® Land Institute (RLI) is a membership organization created for and by land experts, dedicated to building knowledge, building relationships, and building business for its members – the extraordinary real estate professionals – who broker, lease, sell, develop, and manage our most precious resource: the land.
RLI’s, Accredited Land Consultant (ALC) designation is available through RLI with the Accredited Land Consultant (ALC) being the most accomplished, experienced, and highest performing land experts. Accredited Land Consultants (ALCs) follow an ALC Code of Conduct which contains guidelines to a high code of ethics. The Code supports that ALCs are honorable land professionals who recognize the importance of land to life.
Another great source of information is through the National Association of REALTORS® and their International designation, Certified International Property Specialist (CIPS). Comprised of more than 2,000 real estate professionals specializing in any type of international real estate transaction, members are consumers’ best and most trusted resource for navigating the international market.
You can get more information on the REALTORS® Land Institute and the Accredited Land Consultant designation at www.rliland.com and the Certified International Property Specialist designation at www.realtor.org.
Written by Minor Taylor, 2013 HAR International Advisory Group member