Land speculation can generate cash flow similar to what a commercial property can achieve
Rudy Nielsen Western InvestorMay 5, 2020
My more than 56-year career not only as a realtor, but also an appraiser and investor, has taught me the importance of how profitable and rewarding real estate is. Regardless of the up and down cycles, patience is a strength worth cultivating.
Today’s demand for recreational property indicates there is validation of four types of people who purchase these property types: purchasers who want a secure/safe place for family: properties for both recreational use and investment purposes to secure the future (retirement, etc.); purchasers who want to get out of the city and live on their recreational land; and people concerned about the costs of city living and want to put a home or trailer on their property as an investment.
The consistency is in people wanting to protect their financial future and get the most out of their investment.
Over the years, having a diverse land portfolio has proved successful and profitable. I couldn’t have done that without understanding the importance of these three questions:
What is your time horizon?
How much can you afford to lose?
What do you know about the investment?
All three points should give you pause but the last is the most critical.What do I mean? To make money in rural or recreational land and resources from the land, you have to understand the value.
So, what is your time horizon? Over the course of my investment career I have bought and sold on a shorter cycle, as opportunities presented themselves – but a majority of my investments were acquired 30 to 40 years ago. The shorter-term investments help manage cash flow and further secure a hold on my longer-term portfolio by removing pressures to liquidate to meet short-term needs.
Some of my best long-term holds have contained fantastic timber yields and/or gravel. Not very sophisticated, but if you know your investments you will see the potential beyond a simple land buy-and-hold strategy. I have created an effective cash flow many times that is similar to rents that a commercial property investor may receive – but I don’t have to worry about fixing the plumbing or dealing with tenants.
So now you know my three key questions I consider before investing, but I’ve saved the most important until the end. The most important strategy you need to understand are these three simple, repetitive words: research, research, research! I spend 60 per cent of my money on research and 40 per cent on property investments, always picking from the top 10 deals within the criteria of my results.
Do your homework: know one thing better than anyone else by doing your investigations. You will undoubtedly reach a point where there are multiple excellent offers to consider – but you won’t have the cash flow to acquire all of them. So how are you going to determine the best option, based on your answers to the earlier three questions? If you’ve done your research, the answer becomes very clear.
Rudy Nielsen is president and founder of Niho Group of Companies, New Westminster, B.C. Visit niho.com