GOING TO GROUND I was recently asked by a client to do a market analysis on two 35-acre parcels of mountain land that he planned to give to his adult children. He had actually made the same request three years earlier, so I simply had to update the old document with new comparable sales. I dug up my 2021 market analysis and noted that I had valued the two parcels at $140,000 each. I was pleased to find five excellent new comparable sales from late 2023 and 2024. The comps were so close in proximity, vegetation, topography, road access, and utilities that I found it hard to believe. And the value came out at $252,000, or a 55% increase in value in only three years.
Now, we can ascribe a lot of that gain to the CoVid years of real estate, when the market went crazy. But it's more than that. While the World Economic Forum tried to implement the Great Reset, where the goal is to shove people into "15-minute cities" in apartment complexes stacked upon one another, there was a "Great Rural Reset" instead. People took advantage of widespread high-speed internet and searched out where they really wanted to live instead of where they had to live prior to this new technological freedom. CoVid was truly the era of Zoom calls, and people realized they didn't have to get to the airport for tedious meetings in a distant city when they could "jump on a Zoom call" and do it from their country retreat. This phenomenon really accelerated land prices.
But it's deeper and wider than that. I've been cleaning up my office lately, getting rid of stacks of outdated files and papers. As you well know, I'm a member of the Realtors Land Institute, and our Colorado RLI CO Chapter has quarterly marketing meetings. Each broker is allowed to present listings to the group, along with a flyer for each property. I found a box of RLI packets from the September 2013 meeting, and dang, there were some deals! For example, an 1,800-acre ranch near Cedaredge for $2.7 million? Wow! An equine event center with arena and grandstands for $750,000? Are you kidding? At the time, these seemed like well-priced properties for the current market. Today, those same properties would list for 2-3 times those 2013 prices, maybe more, proving once again that land is a phenomenal investment over time.
It's well known that farmland rentals are not a great return on your investment. My colleagues who broker a lot of Iowa farmland, such as Luke Nissen and David Whitaker, will tell you that a 3-3.5% rental return is pretty standard. Let's say you buy 80 or 160 acres of corn ground with a buy-and-hold strategy, and you lease it to a local farmer who plants corn on it. After taxes and expenses, you will typically realize a net return of 3-3.5%. Not great, when the stock market is making triple that amount. However, when you factor in appreciation, it might just beat the stock market. Our latest RLI statistics show that land tends to increase in value 7-10% a year, year over year, and I'm pretty sure that these statistics don't include a jump in land prices over the CoVid years.
We all know that markets fluctuate. While the DOW recently cracked the 40,000 barrier, it's already back down to 38,000 as I write this. Land fluctuates as well. However, the stock market has been poised to crash for years, and canny investors know when to back off and go to "safe haven" investments such as gold, which is up 18% the past year and 78% the past five years. Land is considered one of the best long-term safe haven investments, especially for very wealthy investors who have a lot of cash on hand. My dear friend Dave Alvarez is a nationally known golf pro who has tutored many wealthy students, including Hall of Fame quarterbacks, very famous actors, singers, and Wall Street titans. "When the market starts to turn, they go to ground, baby," Dave says. "They buy dirt."
While everyone loves an income return, many investors just want the property to carry its own costs of taxes, maintenance, and insurance, betting on the long-term appreciation in land values over time. That's why larger holdings have been selling strongly, even as interest rates have tripled. These buyers don't care about interest rates because they're paying cash.
And then you have the factor of owning dirt. As my colleagues say at UC Hunting Properties powered by Realtree, "Stand on Your Investment". It's hard to get a kid really excited about your stock portfolio, but going fishing at the farm pond makes lifetime memories. I was awakened this morning by a rooster pheasant cackling outside our bedroom window, which made me start the day with a smile. We just picked up 11 boxes of prime beef from the local packing plant, which was fed with hay from our ranch. I continue to advocate for land ownership. It's one of life's greatest investments.
And by the way, if you're going to make that investment, be strategic about it. Employ the services of a professional. The Realtors Land Institute recognizes the Accredited Land Consultant designation as the pinnacle in land brokerage. I'm one of only 45 ALC's in Colorado, along with my son, Jake Hubbell. My agents Rocky Mountain Lifestyle Properties - Scott Reece, Loren Williams, and UC Ranch Properties - Spencer Jordan are all studying for the ALC designation. When they've completed the process, we will have more ALC's in one office than any other real estate brokerage in the country. We are land professionals. We love it and live it.
