RecLand conducted an electronic survey among its land buyer and land owner database in January 2015 to get the answers to a few general questions about ownership, mood for acquisition and sales, importance of minerals and cash vs. finance. 138 anonymous respondents from multiple states provided the data. An overview of the results are summarized below:
The first question asked about ownership and acreage owned. The largest segment of respondents - 37.% - indicated they didn't own land other than their personal residence of 5 acres or less or rentals and/or commercial property. This group is apparently eager to purchase land, however, based on 71% of all respondents saying they would purchase land sometime in the next five years. 22.3% indicated they owned up to 50 acres; almost 17% owned 50-200 acres and 23.1% owned 200 acres or more. This seems typical based on the audience of the survey.
The second question asked how those who owned land utilized their land. The largest segment, 39.7%, said theirs was a combination of income-producing land and recreation (hunting/fishing). Just under this group was almost 28% who indicated their land was exclusively for recreational use and generated no income at all. 11.8% of our respondents owned managed, investment-grade timberland. The large combined group of income/recreation and pure recreation speaks to the immensely popular outdoor industry and people's desire to own their own property on which they can hunt and fish. This is a big part of RecLand's base of business each year. This survey just put some numbers on the land-buying activity we see regularly.
Question three asked about plans to buy and sell over the next five years. As previously stated, 71% indicated they had definite plans to buy land (whether a first-time buyer or adding to existing holdings). 7.9% said they would most likely not buy or sell any land during the next five years. This kind of optimistic planning is a good sign for those of us in the land brokerage business as well as for lenders (addressed next), title companies, surveyors, etc.
The fourth question asked how land would be purchased...cash, finance, finance in part, etc. 16.6 said they would definitely pay all cash for any future land purchases. Whereas 47.8% indicated they had access to cash or cash equivalents to fund a purchase but would definitely finance at least a part of a deal. This may indicate an overall awareness of the lower interest rates available now as well as the fact that more and more lenders understand rural land sales and have good financing products to offer the marketplace. An even 1/3 - 33.3% - said they would definitely finance the entire land purchase. The overwhelming response to finance all or part of land purchases may be an indicator of the market's confidence in the growing value of land as a low-risk investment. This is also good news for lenders who understand rural real estate and have a good land portfolio.
The final question was about acquiring mineral rights with a land purchase. It seems that the last few years has ushered in more strong-headed positions about keeping minerals if selling and acquiring minerals if buying. I was a little surprised that 44.8% of respondents indicated that they would certainly negotiate for part or all the minerals but the final decision to purchase would just come down to price per acre with or without any minerals. Another 22% said minerals were not that important in their decision to purchase. The same mount - 22% - however, said they had to acquire all the available minerals in a purchase or they would walk on the deal. All said and done, 78% responded that minerals were somewhat important to a purchase, but the final decision would not be based solely on acquiring mineral rights. Maybe the strong stance we'd seen a few years ago has softened some.
All in all the outlook seems bright for those of us who serve land buyers and land owners. There seems to be a general sense of optimism toward land acquisition and continued ownership. And while income-producing land will always be the ideal, there seems to be a continued growth among people buying land for purely outdoor and recreational interests. I'm please with this overall optimism about land. Afterall...at RecLand Realty, all we do is land!
Pat Porter, Broker