Had a couple of requests to start a thread detailing my ranch business strategy. So here goes.

Step 1. I researched land values all over the regions I was interested in for a couple of years. There is value in information and the info you gain in property values can make u a lot of money. I watched ranches I liked and watched what they sold for. And I learned where the line was where property values started their steep rise in value. In the early 90's this was in the area just west of San Antone. I bought comparable land just west of high prices and waited for high prices to get to me. This principle can still be followed in many areas.

Step 2. Get the best money for your buck. Shop for money. It's amazing to me how many people stay silo'ed in their financing comfort zone. I just had a buddy who found money a full % point below what the banker I referred him to offered. Incredible amount of money to be saved by finding good interest rates.

Step 3. Decide your investment strategy and what you can afford. I wasn't able to afford all the land I wanted to eventually own when I was starting out, so I knew I wanted to sell in 5 or so years and roll profits into more land. So I knew I couldn't fall in love with a place so much that I couldn't sell it. I bought raw land and improved it with sweat equity, and a plan to sell. This allowed me to get 30 year money with a 2 or 5 year fixed rate. Incredibly cheap money that allows you to own a lot more land than you can with conventional loans. I also leased out hunting and grazing to help with cost.

Step 4. When you sell, use the 1031 like kind exchange to avoid income tax on profits. Put that money back into land you've researched. And do it all over again.

We decided that we'd rather own ranches than stock certificates in the mid 90's. We've gotten lucky on some things but over all we made most of our luck. I make no apologies for luck. I'll take it any day.

If you're considering something like the above here's a little motivation. When we were in our first few ranches we were putting minimums down. If you do your research right and get in an area that is appreciating... You are making TONS of money on the bank's investment dollars! If you look at our ROI on those first few ranches based on what we invested.... it's incredible and I'd put it up against the most lucrative investment programs.

And even more important, if an idiot like me can do it, ANYONE can.

I'll answer any questions.

might want to explain to them exactly how a 1031 tax free exchange works

1031's are a huge benefit for those wanting to retire with the biggest chunk of land possible.

At closing u send the profits from sale (All or a large chunk), to a qualified third party to hold the funds (they can't hit your bank ). I use asset preservation in Cali.

U have 90 days to identify 3 properties of like kind to try to buy in the next 6 months. If u succeed in doing that you avoid income tax and cap gains tax on that profit .

The good part is that if u never plan to sell your final property... Ur kids are the only ones who will pay taxes on it after your death.

That allows you to have a much broader and stronger buying power while you're building your dream ranch.

you have 45 days to Identify 3 properties and must close one of them within 180 days (6 months)

Very handy tool that can let you amount larger masses of land than you would have been able to paying taxes.

good article about the FAQ's of a 1031

http://www.1031.org/about1031/faq.htm

Thanks for the info. I do lots of research on land prices and see asking price only obviously. How can I find out what they are selling for?

You can find out from the courthouse records or a trusted REA. For trends u can go with asking prices over time and whether a price is dropped. I always just assumed a 10-15% discount on asking price averages in an area. I bought a ranch once that I had watched for 4 years. They dropped the price right as I sold one and it worked out great. Patience is valuable in this game but so is knowing what u want and pouncing on it. I've got some great experience with both.

What do you mean by this statement? - I bought raw land and improved it with sweat equity, and a plan to sell. This allowed me to get 30 year money with a 2 or 5 year fixed rate.

Where does one fine the cheap money?

Thanks for sharing!

Yep, the way I wrote that wasn't very clear. Sorry. The "plan to sell" allowed me to look at 30 year money (normally a higher int rate) with a 2 or 5 year lock, which brings that interest rate to very near 20 year money.

On a large note (with minimum down) that translates to several to many thousands of dollars/year savings. And you're maximizing the use of bank money for your investment.

Cheap money is actually out there for all, you just have to know what u want and why u want it and then go get it. All the capital farm credit banks that I've seen on line offer 30 year money on their website. If they offer it on their WS you should be able to get it if you're qualified for other loans.

How do you find out what properties sold for? I had a realtor tell me he had no way of knowing this information unless he sold it. I didn't think that was right.

Interested I'm looking at selling my house in the next year or so an using the equity I make off of it plus some I'm saving to buy some land I'd like to get 200 acres but what ur saying is but say 50 do improvements to it sell it for more use 1031 tax break and buy a little more land and repeat till I get to my goal of 200 acres?

Most realtors know what ranches sold for because even if they didn't sell it, they know what the owner was saying he'd take. There are exceptions but I believe that fits the 80/20 rule.

I believe you can search county records and find sale price too. PITA but possible.

A lot of realtors produce color glossy charts now with all kinds of sale data on them.

Also, when you're looking at property you can pick the REA's brain (u'll need micro tools for this) and they'll usually tell u an approximate base price acceptable to the seller.

You really don't need it to the penny tho. Close is good.

Yep that's safer than over extending yourself first and can help you keep more if your money and use more bank money.

When you do a 30 year term with a 2-5 yr lock at interest rates close to 20-yr fixed, what are rates typically doing after that 2-5 yr lock period? I'm trying to get my head around all of this.

I'm a young guy and have a little cash to burn (invest). This intrigues the hell out of me...

Here's a couple of good tips too.

1. Look in a multiple of sources. Landsoftexas has many properties, but there are many that aren't listed there. Look at the magazines and newspapers too. I'll list a paper mag later that has regional issues and it has a ton of properties statewide that aren't in LOT.

2. Always be prepared to force a contract down the throat of the REA when you first look at a property. Do all your homework before you go see a place so you'll be prepared to do that. I typically take my lawyer with me. I have two experiences I'll share later to illustrate why this is important.

Suffice to say right now, my first convo with any REA is "if Jake or Buck Laning are gonna make one dime off this deal, then I'm outta here". Yeah, it's that bad.

Short story: they had a place listed (only in a local Uvalde paper) for over a year (I found out later). I happened to pick up that paper and asked to see the place that morning. Couldn't believe the deal when I saw it. Called the next day and said I'd come look and make an offer later that week (we discussed price and everything. I called the next day to set up a time to meet and was told there was already a contract. Yep, they had a pocket buyer, they didn't tell the seller about me, and got the seller to agree to a price lower than I was offering.

. They go up or down with the market.

What is a typical (if there is such a thing) down payment percentage of the sales price? After the 2-5 year term, does the interest rate revert back to original 30 year rate?

Sales prices are not listed in the deed or public records.

If a vendors lien is recorded, it will be on there as well as the amount of the lien, but that is not the sales price.

The language most commonly used is "in the amount of $10 and other good and valuable consideration"

Sales prices are not public record.

You will either have to get an appraisers comp or see the sales contract to know the price

Did you actually look at the property or did you just discuss price over the phone?

Brandon I not only visited the property, but jake gave me a vid of the place that was dated a year earlier so I knew it had been for sale for a year.

When he told me they had a signed contract I found the seller and asked if jake had told him about me and the fact that I had set up a date to come make an offer. Seller had never heard about me.

So I told the seller that jake had a responsibility to tell them about me and since he hadn't I asked the seller if he wanted to back out of the contract and sell to me. He said he hadn't signed the contract yet but had given his word. He took 25 bucks less per acre than I was going to offer because he gave his word to a liar.

That's why I bring a lawyer with me now. It keeps REAs honest.

And when I visit a place it's pretty much just a formality. All my homework is done well in advance.

The interest rates generally follow long term trends. Right now I think it's a good bet the will rise over the next 5 years. 20% down is usually the rule.

Not saying that the above scenario was a poor way of doing business, but the agent only has to present offers in writing. Verbal means nothing. Had you written it up on the spot and gave it to laning it would have been a entirely different matter

I have people tell me all the time "oh, I'm gonna write it up tomorrow first thing" and it never comes". I've been waiting for that next day offer for a month on a karnes county property I have for sale.

That being said, it's possible they had another buyer on the line and they called and said that they showed the place and that is what spurred him to put something in writing.

I could tell you a million stories about verbal offers that never get put to print. If you tell a seller about a offer you have comming and it never comes it makes you look bad.

Rule of thumb is first one in writings gets to play ball

Really? So you wouldn't tell your client about a potential offer that was 8% higher, and let them make the decision on whether to wait 2 days? After they'd already waited for over a year?

That's real good info to know when picking an REA.

It would not matter. the ethical thing to do is negotiate with the first one in writing.

If you put a offer in on a place it would not matter if it was higher, If I had one already on the table the landowner would negotiate with that person until the deal was dead, then move on to the next offer.

what about if he had an offer come in and it had a termination of 24 hours?

what if he would have gotten the offer in writing then waited on your offer (that may or may not have come in 2 days) and the original guy went and found something else and you didn't follow thru with the contract? now the seller has shot himself in the foot waiting on a phantom contract.

if you were serious about the place and knew what it was already and had done your homework you should have written up a contract then and there after looking at it. not "two days later"

Your running down Laning (Jake has been dead since early 2011 btw) and his son when really they did nothing wrong.

they showed you a place, and ya'll talked about price. you told them you were going to make an offer later that week. They received a offer before you wrote anything up and the seller decided to take it. You don't know they had a pocket buyer, which that has no relevance on anything anyway, it could have been a guy that looked at it the week before for all you know, and the seller accepted a written offer that was presented to him. That's it in a nutshell. I can understand your being upset because you didn't buy the place but its not the Brokers Fault if it went down the way you described, he played it by the book.

If you were looking to spend $300,000 within 4 hours of DFW. Where would you look to buy land for hunting and appreciation? Thanks for the guidance.

That's out of my core area. any land around Austin, Lake LBJ, kingsland, llano, burnet, etc is a good buy if the property is in the right location. won't get much for $300k in that area though.